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Why Hysteresis (Economics) Will Affect Unemployment?

In economics, hysteresis is a situation which arises when any historical event affects the future economic path. Any disturbance in an economy will lead to a trickle down effect, and the problem will persist for long. This rolling down impact is known as the hysteresis effect.


It is a Greek term coined by the Scottish physician and engineer Sir James Elfred Ewing, who explained it as the time gap between the action and reaction of any physical instrument or object.

For instance, the natural rate of unemployment in an economy gets affected by a single historical event, persists for a long period and results in the Hysteresis effect. The long lasting unemployment will cause a loss to the economy in terms of loss of job skills; an unemployed person will adjust himself to a lower standard of living and will not desire to achieve the previous standard of living.

In addition, an increase in the number of unemployed will create a social notion to remain unemployed. The result will be prolonged, will result in structural unemployment and the natural rate of unemployment will rise further. This economic cost to the economy will result in the Hysteresis effect.


Hysteresis comes from the Greek term meaning "a coming short, a deficiency." Hysteresis, a term coined by Sir James Alfred Ewing, a Scottish physicist and engineer (1855-1935), refers to systems, organisms and fields that have memory. In other words, the consequences of an input are experienced with a certain lag time, or delay. One example is seen with iron: iron maintains some magnetization after it has been exposed to and removed from a magnetic field.

Breaking Down

In economics, hysteresis arises when a single disturbance affects the course of the economy. An example of hysteresis in economics is the delayed effects of unemployment. As unemployment increases, more people adjust to a lower standard of living. As they become accustomed to the lower standard of living, people may not be as determined to achieve the previously desired higher living standard. In addition, as more people become unemployed, it becomes more socially acceptable to be or remain unemployed. After the labor market returns to normal, some unemployed people may be disinterested in returning to the work force.
Thats true..
(20-10-2016, 07:15 PM)kayle Wrote: Thats true..
I agreed with you Kayle...!!
Thanks for the post........!!!
If a country is not Economically strong there will be definitely Unemployment problem......
Nice reply Amanda....
I'll totally agree with you...

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