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UNEMPLOYMENT (Types and causes of unemployment (Structural unemployment…

- - - - A labour exchange can be established, whereby people who desire to change jobs can register their requirements, and employers who desire to employ workers can register their demand. (E.g. JobsCentral, Careers@Gov, MyCareersFuture)
        
        Time taken for job search is reduced as such platforms provide and information pool for both workers and employers
  - - - Supply Side policies
        
        Provide retraining facilities, grants and subsidies for workers to learn new skills that are sought after or help them to fit into their new jobs
  - - - Implement a work sharing programme, whereby available employment is spread equally among workers
        
        Rearrange the production process such that production is spread evenly throughout the year
        
        Add other lines of production
  - - - Restrict the power of trade unions so that they are unable to demand for excessive wage increases
        
        Reduce or remove the legal minimum wage to encourage labour-intensive industries to continue operation
  - - - Expansionary Fiscal Policy
        
        Government can lier tax or raise its expenditure on goods & Services & public works
        
        Rise in production could lead to higher AD, thus more labour being demanded.
      - Supply management policies
        
        Reduce structural rigidities by recommending wage cuts or providing subsidies to reduce the COP
        
        Increase SRAS, leading to a rise in employment
      - Expansionary monetary policy
- - - - Unemployment causes a waste of scarce economic resources, resulting in a lost of production, where the economy is producing within its PPC.
        
        Welfare loss to the society is represented by the output forgone due to unemployment.
    - - Fall in tax revenue as unemployed do not pay income tax and pay less GST
        
        Could lead to budget deficit if government increases spending on unemployment benefits
        
        leads to opp cost, where government might need to scale back plans on public and merit goods
    - - Waste some of the scarce resources used to train workers
        
        Workers will face an erosion of skills with time, causing quality of of workforce to deteriorate
        
        Deterioration of quality and decline in productivity is illustrated by a leftward shift of LRAS or inward shift of PPC
- - - - Due to competition from Newly Industrialized countries or emerging economies (USA, China, India)
      - Technological unemployment
        
        Previously labour intensive jobs may now be replaced by advanced and more efficient machinery or relatively capital intensive processes.
    - - Due to greater integration with the global economy and thus reliance on external demand. ( esp so if DC is highly dependent on electronic goods as electronic goods are cyclical in nature)
  - - - Due to poor transport and communication systems, resulting in a long time to search for a suitable job/ worker.
    - - Such economies are predominantly agricultural based which are affected by seasonal demand/ climatic conditions.
    - - When DCs face cyclical unemployment, LDCs are affected as DCs are principal export markets
    - - Due to low level of demand and output
        
        Low income->low saving->low consumption->low demand->low investment->low productivity->low EG-> incomes remain low