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Unemployment (Natural Rate of Unemployment (Structural (Changes in labour…
Unemployment
Natural Rate of Unemployment
Structural
Changes in labour demand
Technological advancements
Changes in product demand
Loss of comparative advantage
Changes in geographical location
Labour market reforms
Frictional
Cause: imperfect flow of information
Seasonal
Solutions
Market-oriented
Reducing unemployment benefits
Reducing income tax
Deregulating labour market
Interventionist
Structural
Encourage geographical mobility
Encourage employees to move through incentives such as housing and education grants
Encourage training of workers
Set up training centres
Direct provision of firms with training programmes
Grants/low interest loans
Increase demand for labour
Establishing projects that create jobs in depressed areas
Offering incentives for firms to locate to depressed areas
Frictional & Cyclical
Set up job searching websites, career fairs, career guidance
Measurement difficulties
Concealed differences
Region (North vs South London)
Gender
Age
Ethnic groups
Occupation & education attainments
Over-estimation
Underground economy
False representation
Under-estimation
Hidden unemployment
Underemployment
Demand-deficient Unemployment
Cause: deficit in AD
Solutions
Expansionary monetary
Decrease interest rates
Expansionary fiscal
Decrease tax rates
Increase GS by shifting forward government projects
Consequences
Economic
Lower output
Decrease in tax revenues
Loss of income for unemployed
Additional costs to government
Deskilling
Social
Increased social tension
Psychological stress