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UNEMPLOYMENT: refers to number of people of the legal working age who are…

- - - - Prolonged Unemployment --> waste of scarce economic resources--> reduce LR potential growth of economy as people choose to leave labour market, affects LRAS as well
      - High unemployment --> economy producing within PPC --> loss of output that could have been produced by the unemployed means welfare is not maximised
    - - Fall in tax revenue from income tax and GST as unemployed people are more likely to spend less
      - Government may run into a budget deficit if it increases spending on unemployment benefits. May in turn increase the risk that the government have to raise taxation or decrease spending on public and merit goods.
    - - Long term unemployment --> erosion of skills with time
        --> reduces chances of getting employed in the future (ADVERSE IMPACT ON SHORT TERM ACTUAL GROWTH
        
        POTENTIAL GROWTH as quality of workforce worsens or cause some workers to leave labour force permanently --> productivity decreases or productive capacity declines
        (LEFTWARD SHIFT OF LRAS OR INWARD SHIFT OF PPC)
- - - - Fall in AD (economic recession) --> fall in NY and output -->
        less production -->fewer workers required --> employers lay off workers and cut back on employment
    - - Increase AD with expansionary monetary and fiscal policies
        --> increase AD (through I & C) --> Rise in production to meet AD --> more labour demanded
      - Reduce structural rigidities such as recommending wage cuts or providing subsidies for COP --> increase SRAS (LR no change) --> a rise in employment --> bring economy closer to full employment.
  - - - Annual weather cycle
      - Traditions and Customs
    - - Work-sharing programme
        
        Minimise seasonal unemployment as the available employment is shared equally among workers. (eg. by hours)
      - Rearrange production to spread out evenly throughout the year even during off-peak seasons.
      - Add other lines of production to allow workers to remain employed throughout the year.
      - Price system:
        
        For holiday resorts industries, by offering reduced off-peak season rates, hotels can be utilised for other purposes such as conferences t
  - - - Trade unions bargaining for higher wages or minimum wage laws such that wages are forced above market clearing level, there will be an excess of labour supply over labour demand
        --> SURPLUS OF LABOUR (real wage unemployment)
    - - Restrict power trade unions and reducing or removing the legal minimum wage
        eg. Rise in wages controlled --> labour-intensive industries encouraged to continue operation --> workers in these industries remain employed.
  - - - Can be minimised by better job information and improvements in the employment exchange services
        
        Labour exchange -- institution set up by the government or trade union or industries as an information pool (with requirements of workers and demands of employers) for both workers and employers, through which qualified unemployed workers can be matched up with existing job openings
        
        Improvements in information-communications tech such as online job portals eg, JobsCentral --> reduce time taken for job search
        
        Improvement in industrial relations --> improve organisational ability of management to reduce breakdowns and bottlenecks --> reduce no. of laid off workers from strikes or voluntary resignations due to poor staff management
  - - - Due to mismatch of skills and jobs due to a change in the structure of the economy.
        
        Change in pattern of demand
        
        Declinging demand (eg. change in consumers' tastes) leads to skills of the workers becoming obsolete, resulting in them becoming structurally unemployed
        
        Change in conditions of supply
        
        Regional unemployment
        
        When certain regions experience full employment but other regions have unemployment (geographical immobility)
        
        Technological unemployment
        
        Doing away with certain jobs and skills or Creating new jobs which many of the unemployed are incapable of doing. (occupational immobility)
        
        when new labour-saving technology allow the same level of output to be produced with fewer workers, leading to a fall in demand for labour and a rise in unemployment
        
        Tackled by supply-side policies
        
        Upgrading skills of the workforce:
        
        Provision of retraining facilities enables workers to learn new skills that help them fit into new jobs.
        
        Govt. can provide grants and subsidies for skills upgrading to encourage workers to develop skills that are sought after.
        
        With manpower planning, the education system can also be geared towards meeting the requirements of the changing economy.
        
        Subsidies to manage change in economic structure
        
        Grants and incentives
        
        Control the location of an industry to control the level of structural unemployment (geographical)
        
        Encourage growing industries to move into depressed areas via tax incentives and subsidies to create job opportunities for the unemployed in those areas
        
        Govt. can provide funds to support declining industries but may not be favorable in the LR as costs increase for declining industries and it becomes an increasingly large burden on government.
        
        Industrial innovation and changes needs to be coupled with an agreement to continue to employ workers who would otherwise be made redundant by new tech.