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Chapter 9: Unemployment - Coggle Diagram
Chapter 9: Unemployment
Consequences
Economic
fall in tax revenue due to lower or no income -> budget deficit -> government may raise taxation and scale back plans for spending
erosion of skills over time -> chances of getting employed falls, quality and productivity of work force falls -> inward shift of SRAS and LRAS -> fall in productive capacity
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Social
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fall in physical and mental health of individuals -> protests, violence and social unrest
Types and Causes
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Seasonal
seasonal fluctuations in level of economic activity eg. annual weather cycles, traditions and customs
Structural
mismatch of skills and job vacancies due to location or skills of labour force not matching available jobs
declining demand due to change in consumer taste and preference or competition from other industries
Technological unemployment where technological advancements result in fall in demand for labour (due to occupational immobility)
Regional unemployment where certain regions have full employment while others have unemployment (due to geographical immobility)
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Frictional
imperfect information for jobseekers and firms -> time lag before finding the right job for them or qualified workers
Policies
Cyclical
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supply-side policies to be used alongside to help reduce or prevent cyclical umeployment from getting worse eg. reduce structural rigidities
Seasonal
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rearrangement of production processes such that they are spread evenly throughout the year or adding other lines of production
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Structural
Supply-side policies eg. skills upgrading, subsidies and incentives that manage changes in economic structure
Frictional
better job information, improvements in employment exchange services and improvement in industrial relations eg. labour exchange institution, career adivisory services or platforms to meet employers face-to-face
Real wages
wages set at more realistic levels to reflect changing demand and supply conditions eg. restricting powers of trade unions or reducing/ removing legal minimum wage
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