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UNEMPLOYMENT (Frictional unemployment (What is it?
-Occurs when people…
UNEMPLOYMENT
Frictional unemployment
What is it?
-Occurs when people leave their jobs-voluntarily or sacked, or when new entrants are looking for jobs.
Cause: imperfect info by job seekers and employers, resulting in time lag in finding employment
-as long as time lag is not too long, frictional unemployment is not a serious problem
Solutions 1.Btr job info and improvements in employment exchange services; a labour exchange can be set up, providing an info pool for use of workers and employers -Improvements in infocomm tech reduces time taken for job search 2.improvement in organisational ability of management to reduce breakdowns and bottlenecks; reduce no. of laid-off workers from strikes n lock-outs or voluntary resignations due to poor management
Structural unemployment
What is it?
-unemployed workers lack the skills needed for the job or are in the wrong location of the country to take up these jobs
-mismatch of skills and opportunity due to structure of the economy changing
Causes
1.Change in pattern of demand
-some industries experience declining demand. This may be due to change in consumer tastes or competition from other industries. If fall in demand is permanent, structural unemployment may result and worker's skills may become obsolete
2.Change in conditions of supply
Technological unemployment: Introduction of new labour-saving technology allows same level of o/p to be produced with fewer workers, decreasing demand for labour
results in: i)doing away with certain jobs or skills or ii)creating new jobs that many unemployed are incapable of doing
occupational immobiliity is a particular problem with tech unemployment
3.Movement of certain industries to a different location a developed country may move production to a developing country due to lower opp cost of production. Workers may become unemployed as their skills are no longer required in that economy
4.Regional unemployment
Occurs when certain regions experience full employment but other regions have unemployment. This may be due to geographical immobility of labour
Solution
1.provision of retraining facilities to learn new skills and help workers fit into new jobs
2.govt can provide incentives such as grants and subsidies for skills upgrading
3.Education system can be geared towards meeting requirements of changing economy
4.Encourage growing industries to move into depressed areas via tax incentives and subsidies, creating employment opportunities for the unemployed there
5.A declining industry can be supported by funds from the govt
-subsidies can be used to support a larger o/p thus create more jobs for those who would otherwise be unemployed
6.With innovation , an agreement must be reached to continue to employ workers who would otherwise be deemed redundant
Limitations
-In the long term, agreements to hire surplus workers raise costs and hastens decline of an industry; industry becomes a large burden to govt.
Cyclical unemployment
What is it?
unemployment associated with the business cycle -alternating booms and slumps in economic activity.
-unpredictable and irregular
Cause:deficiency of effective demand,economic recession
-represented by leftward shift of AD curve which results in fall in NY and o/p: fewer goods are produced thus firms cut back on employment as fewer workers are required.
Solution
Demand management policies:
-expansionary monetary policy increases money supply
-expansionary fiscal policy; govt lowers tax or raises expenditure on goods n services n public works; rise in pdtion to meet higher AD leads to more labour demanded
Supply management policies:
-govt can reduce structural rigidities such as recommending wage cuts or providing subsidies to reduce COP
-increase SRAS, increasing employment and o/p
Real wage unemployment
Trade unions bargain for higher wages or if there is a minimum wage law by wage council, real wages are forced above the market clearing level
-there is excess of labour supply over labour demand , resulting in a surplus of labour or real wage unemployment
Solution 1.restrict the power of trade unions 2. reducing or removing minimum legal wager ;rise in wage costs is controlled, thus firms are encouraged to continue pdtion, workers remain employed
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Seasonal unemployment
What is it?
unemployment that results from seasonal fluctuations in level of economic activity ; regular and predictable
Causes:
1.Annual Weather cycle
2.Traditions n customs
Solution
- work sharing programme; available employment is spread equally among workers, e.g work lesser hours per day.
-limitation: underemployment of workers
2.rearrange pdtion processes such that pdtion is spread evenly throughout the year; possible if stocks are cariied even in off-peak seasons
3.Other lines of pdtion can be added to allow workers to remain employed throughout the year
4.Offer reduced off-season rates
-e.g hotels at holiday resorts can be utilised for other purposes like holding conferences