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employment and unemployment - Coggle Diagram
employment and unemployment
Full Employment
Definition:
When all available labor resources are being used efficiently, with only natural unemployment (frictional, structural) present.
Types of Unemployment
Equilibrium Unemployment:
Occurs even when the labor market is in equilibrium, includes frictional and structural unemployment.
Disequilibrium Unemployment:
Caused by wage rates being above the equilibrium level, leading to unemployment (e.g., cyclical unemployment).
Voluntary vs Involuntary Unemployment
Voluntary Unemployment:
Occurs when individuals choose not to work at the current wage rates.
Involuntary Unemployment:
Occurs when individuals are willing to work at the current wage rate but cannot find employment.
Natural Rate of Unemployment (NRU)
Definition:
The level of unemployment that exists when the labor market is in equilibrium, comprising frictional and structural unemployment.
Determinants of NRU:
Labor market flexibility, skills mismatch, government policies, and mobility of labor.
Policy Implications of NRU
Policies to Lower NRU:
Enhancing labor market flexibility (e.g., reducing regulations, improving education).
Supply-side policies to improve skill levels and reduce structural unemployment.
Patterns and Trends in Unemployment
Global Trends:
Economic shocks, globalization, and technological change can influence long-term unemployment rates.
Youth and Long-Term Unemployment:
Youth unemployment and long-term unemployment tend to be more persistent and harder to reduce.
Labour Mobility
Forms of Labour Mobility:
Geographical Mobility:
The ability of workers to move between different locations to find employment.
Occupational Mobility:
The ability of workers to move between different occupations or industries.
Factors Affecting Labour Mobility:
Housing availability, cost of relocation, retraining opportunities, family ties, and government incentives.
Policies to Reduce Unemployment
Demand-Side Policies:
Fiscal and monetary policies to stimulate aggregate demand and reduce cyclical unemployment.
Supply-Side Policies:
Education and training programs, labor market reforms, and incentives for businesses to hire more workers.
Effectiveness of Policies:
Success depends on the root cause of unemployment (e.g., cyclical vs structural) and the flexibility of the labor market.