It’s no secret that employment is a key component of economic growth. When people have jobs, they have money to spend on goods and services, which helps businesses grow and create more jobs.

Countries with low unemployment rates will always be more economically viable than those with high unemployment rates.

In this blog post, we’ll explore the relationship between employment and economic growth and discuss why it is essential for policymakers to focus on creating jobs.

The Link Between Unemployment & Economic Growth

Numerous studies have found a strong correlation between unemployment and economic growth.

For example, a study by the European Commission found that a one percentage point increase in the unemployment rate leads to a 0.42 percentage point decrease in GDP growth.

While the relationship between employment and economic growth is complex, several theories explain how jobs impact economic growth.

The most popular theory is the Keynesian multiplier theory, named after British economist John Maynard Keynes.

This theory states that when people are employed, they will have money to spend on goods and services, which will spur businesses to grow and create more jobs.

Another theory is called the human capital theory, which theorises that businesses should invest in their employees the same way they invest in their equipment and supplies.

For example, a business will spend a lot of money on software and equipment to ensure smooth operations. So, they should also invest in training and development opportunities for the employees.

When a person is unemployed, it can lead to feelings of insignificance, low self-esteem, and a lack of motivation and impact on the economy.

Policymakers should focus on creating jobs because employment isn’t just crucial for economic growth; it also improves the well-being of citizens.

Unemployment can lead to financial instability, mental health problems, and social isolation.

Jobs Give People Purchasing Confidence

One of the most critical roles of employment is providing people with an income. This income gives people the confidence to buy goods and services, which helps businesses grow and create more jobs.

Income also allows people to save money, which can be used for investments, such as starting a business, buying a house, or financing other ventures that will help boost economic growth.

Jobs Create A Virtuous Circle Of Economic Growth

When businesses are doing well and creating jobs, this has a positive effect on the economy. As companies expand and make more profit, they pay taxes which help fund public services and infrastructure.

This makes the country a more attractive place to invest, leading to even more economic growth. The government can also use taxes from businesses to invest in education and training, which will make the workforce more productive and create even more jobs.

Why Policymakers Should Focus On Creating Jobs

Given the importance of employment for economic growth, it is clear that policymakers should focus on creating jobs through a variety of policies such as investing in infrastructure, providing tax breaks for businesses, or increasing access to finance.

What is essential is that the government creates an environment where businesses can thrive and create jobs. Only then will the economy be able to grow and provide prosperity for all.

However, it’s also your responsibility to ensure you contribute to the economy by growing your skills and improving your employability.

What Is Employability?


Employability is the ability to get and keep a job. It is about having the right skills and experience that employers are looking for.

There are several things you can do to improve your employability. Let’s take a look at them in more depth.

Take On Internships & Work Experience Placements

One of the best things you can do to improve your employability is to take on an internship or work experience placement. This will allow you to gain the valuable skills and experience employers are looking for.

It’s also a great way to make connections in your chosen industry and to remain updated about potential job opportunities.

Skill Yourself Up

Another way to improve your employability is to skill yourself up, including studying for a qualification or taking on extra training to make you more attractive to employers.

For example, if someone’s hoping to become a plumber or electrician, they can gain a qualification through the Skills Training Group and enhance their employment options.

Stay In The Know About Industry Trends

It would be best if you also made an effort to stay in the know about industry trends and keep up to date with news and developments in your chosen field. This way, you’ll be able to identify potential opportunities and make sure your skills are always relevant.

Certain industries, such as digital marketing, are highly competitive, and the rules change regularly. For example, search engine optimisation is entirely different today from five years ago.

By understanding your industry, you’ll be able to adapt to new changes and make yourself a more attractive candidate to potential employers.

Don’t Be Afraid To Put Yourself Out There

Remember, it’s not enough to just sit back and wait for opportunities to come your way; you need to be proactive and put yourself out there.

This means networking, attending industry events, or even applying for jobs that are slightly out of your comfort zone. After all, you never know where your next big opportunity might come from.

Networking can also lead to opportunities in terms of finding a mentor. Mentors help people to get into the careers they want by providing advice and guidance along the way.

The Bottom Line

Hopefully, this guide gives you an idea of why employment matters for economic growth, and you can identify the link between the two. It’s no secret that we live in a volatile world, and job security isn’t always a given.

However, by skilling yourself up and embracing the opportunities offered to you, you’ll be able to minimise unemployment time and continue to contribute to the economy.

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