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Unemployment (Types & Causes (Cyclical unemployment (Associated with…

- - - - Deficiency of a effective demand. During economic recession
  - - - Traditions and customs
      - Annual weather cycle
  - - - Change in demand
      - Change in conditions of supply
        
        Regional unemployment
        
        Technological unemployment
        
        Movement of certain industries to different location
  - - - Information is imperfect. Example: Fresh graduate
- - - - Reduce number of laid-off workers from strikes & lock-outs or voluntary resignations due to poor staff management
  - - - Reduce structural rigidities (recommending wage cuts)
  - - - Restricting power of trade unions & reducing/ removing the legal minimum wage.
- - - - Waste of scarce economics resources. Reduce LR potential growth of economy. Loss in production. Loss of output that could have been produced by the unemployed means that welfare is not maximised. Hence, welfare loss to society represented by the output forgone due to unemployment
      - If prolonged, people may choose to leave the market permanently as they lost the motivation to search to work, negative effect on LRAS & damaging economy's growth potential
    - - Few people working = fall in tax revenue. Government increases spending on unemployment benefits. may run into budget deficit. Increase the risk government will have to raise tax/ scale back plans for spending on public & merit goods
    - - Wastes some of scarce resources used in training workers. Workers may face erosion of skills with time, reduces their chances of gaining employment in the future -> not only to adverse impact on SR economic growth but affecting potential growth as quality of workforce worsens
      - May cause workers to exit from the labour force, resulting in future decrease in productive capacity