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Unemployment - Coggle Diagram

- - - - Market imperfections:
        the imperfect knowledge on existing market conditions can cause employees to be ignorant about the available job opportunities, and employers, to be not fully informed about the available labour (badically they dont know better and hence may not make the right decisions and leave their jobs / not hire people)
  - - - Changes in the patterns for demand of labour skills
        
        The long-term demand for an industry's goods and services can change due to competitions from cheap imports and the invention of substitutes and a change in tastes and preference. When this occurs, the demand for an industry's goods and services will fall, production falls and hence the demand for labour will fall, and workers become structurally unemployed. (There is a fall in demand for workers who possess the skills required in the sunset / declining industries and there is a rise in the demand for labour who have the skills required in the sunrise / emerging industries)
        
        This can also happen within an industry, when the production shifts from low skilled to high value add productions, and workers who are lack the relevant skills will become structurally unemployed
        
        Changes in the demand for labour skills can also result from the changes in economic structure (from agriculture to manufacturing to service)
      - Changes in technology
        
        Technological advancements can make the work of some people redundant and increasing automation has led to job cuts in many developed countries
      - Changes in geographical locations
        
        If a firm / industry (esp. if it is large) choose to move to another region, there will be a fall in demand for labour in the original region and a rise in demand for labour in the new region. And if the workers are unable to move to economically expanding regions, they become structurally unemployed
      - Labour market rigidities
        
        Labour marker rigidities refer to factors that prevent the market forces of demand and supply from operating in the labour market. These increase the cost of production of firms, hence causing a fall in the demand for labour as the production falls
        
        Types
        
        Greater unemployment benefits
        
        This increases the attractiveness of remining unemployed and reduces the incentives to find employment
        
        Trade unions
        
        Trade unions bargaining with employers will raise the equilibrium wage that can cause unemployment
        
        Minimum wage legislation
        
        Minimum wage legislation brings about a higher equilibrium wage rate, causing unemployment
        
        Employment protection laws
        
        This protects the employment of workers in that it makes it harder to firms to fire workers, as they will have to pay a compensation if they do so, hence they may become more cautious about who they hire in the first place
- - - - Unemployment figures do not make a distinction of part time and full-time jobs, and having a part time job is considered as having full-time employment (though the person is under utilised)
    - - Unemployment figures do not make a distinction in the type of work that is done. So if a highly skilled worker works as a cleaner, he is still considered employed even though he is clearly underemployed (unemployment)
    - - Unemployment figures do not account for unemployed workers who become discouraged and gave up looking for a job after trying unsuccessfully for a period of time, and thus stop searching. (though they are effectively dropped out of the labour force they may still be considered in the economically active population)
    - - Unemployment figures do not include those who are undergoing retraining following a loss of jobs and those who are retired although they would rather be working (considered employed even though they don't have a job)
  - - - it refers to the part of the economy that is legally unregulated, unreported and unregistered by the tax authorities
      - Unemployment figures do not include those who are working in the informal economy (they have employment and income, but it is not officially declared for obvious reasons)
- - - - When people are deprived of the opportunity to sell their labour in exchange for an income, the tax revenue of the government will fall as the unemployed do not pay income tax. At the same time, the government will incur greater expenditure in the form of unemployment benefits to help the unemployed. And this means that there will be lesser funds available for alternative uses and hence an opportunity cost is said to be incurred. If the expenditure is greater than the tax revenue, then the government will incur a budget deficit
    - - To many economist, a persistent unemployment is a sign of market failure as it is a waste of scarce represents that leads to a loss in potential output of the economy. This means that the economy is producing well below maximum capacity. As unemployment rises, the real national output contracts and the economy is producing below its full capacity.as the unemployed could have been producing something of value to the economy but they cannot, hence this means that the society is deprived of a higher output and standard of living, for as long as those people remain unemployed.
        furthermore, unemployment represents a waste of resources that could have been used for training and education of workers. ?And the longer the period of unemployment, the greater the loss in skills and motivation. Thus, a high rate of undemploymeny would reduce the quality of the labour force and hence the country's economic growth potential
    - - This arises because the unemployed become poorer while the employed are able to retain their incomes. Since certain population groups are more likely to be harder hit by unemployment, the increasing in income inequalities and poverty will tend to be more concentrated amongst the population groups that are already more disadvantaged to begin with. If the unemployment persists and is high, then there may be increased social tensions and unrest
    - - As unemployment rate rises, the consumer confidence falls and hence people are less willing to spend and are more likely to build up their precautionary savings. Hence there is a fall in C and a fall in AD and real national output, causing unemployment to further rise
  - - - Being unemployed means a loss of income and increased level of indebtedness as people may have to resort to borrowing to survive. It causes great psychological stress and may also lead to lower levels of health, family tension, breakdowns and even suicides
    - - High rates of unemployment, especially if it is unequally distributed, can lead to serious social problems including increased crime rates, violence, drug abuse and homelessness