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30.4 Reducing Unemployment - Coggle Diagram
30.4 Reducing Unemployment
Cyclical Unemployment
its control is the subject of stabilization policy
WHAT IS IT?
→
increase AD (happens during a recessionary gap
); does this through fiscal and monetary policy
real question isn't how cyclical unemployment can be reduced but rather
how much
gov. can and should do regarding reducing unemployment... IN OTHER WORDS,
how much involvement should gov. have in implementing its stabilization policies after recessions?
Frictional Unemployment
WHAT IS IT? → turnover in labor market
; it is unavoidable seeing people will leave jobs and gain new ones
Employment insurance (EI) is one method of helping people cope with their costs (makes people want to stay in current jobs → ↓unemployment; HOWEVER, EI has its benefits (alleviate suffering of unemployment) and costs (contributes to search unemployment/frictional unemployment → people getting job to be eligible for EI and also people leaving jobs not eligible for EI) but benefits exceed the costs so many people like this implementation
To focus on people in general need and reduce its effects on raising u-rate, many provisions have been added to EI program
EXAMPLE
→ workers must seek employment to be eligible for EI; workers who voluntarily quit their jobs are not eligible to collect EI
Structural Unemployment
WHAT IS IT? →
reallocation of labor among occupations, industries, skill categories, etc; matching S and D of labor
; Δ in technological and technique skills = value of knowledge and experience of previous workers being lost → value not wanted anymore...; ALSO seen as inevitable part of market economy
there are two basic approaches to reducing structural unemployment:
resisting change & assisting adjustment
Resisting Change
over long-term, policies aimed at maintaining employment levels in declining industries run into increasing difficulties; all industries do by following "resist change" method is lead their industry WORSE OFF → public support is lost, higher costs in keeping people where they are, etc.
Assisting Adjustment
accept the decline of specific industries and loss of specific jobs that go with them AND try to reduce the cost of adjustment for the workers affected
one policy → publicly subsizdized education and retraining programs;
another policy → motivated by difficulty in obtaining good information about current and future job prospects
policies to increase retraining and to improve flow of labor-market info will → ↓amount of structural unemployment