chapter 9 Flashcards
Unemployment definition
the number of people of legal working age who are willing and able to work but are unable to find suitable employment
Types of Unemploymennt
- natural unemployment
1. frictional unemployment
2. structural unemployment
- cyclical / demand-deficient unemployment
- seasonal unemployment
- real wage unemployment
Frictional Unemployment
caused by imperfect information
Structural Unemployment
caused by mismatch of skills due to change in the structure of the economy
Cyclical/Demand-Deficient Unemployment
caused by a defficiency of effective demand
Seasonal Unemployment
caused by seasonal fluctuations
Real Wage Unemployment
caused by real wages being forced above market clearing level
Economic impact of Unemployment
- loss of output of goods and services
- loss of welfare
- fiscal costs to the government
- loss of productive capacity
Social impact of Unemployment
- severe hardship & misery
- increased stress levels
Policies to reduce Frictional Unemployment
- frictional unemployment better job information
- improvement in employment exchange services
Policies to reduce Structural Unemployment
supply-side policies
- ungrading skills / reskilling of the workforce
- using subsidies to manage the change in economic structure
- provide grants/subsidies to incentivise workers to upskill/reskill
- gear education system towards meeting the requirements of the changing economy
Policies to reduce Cyclical Unemployment
- expansionary monetary policy
- expansionary fiscal policy
- reduce structural rigidities
- recommend wage cuts / provide subsidies to reduce cost of production
Policies to reduce Seasonal Unemployment
- rearrange the production process
- create other lines of production
Policies to reduce Real Wage Unemployment
- restricting power pf trade unions
- reducing/removing legal minimum wage
Forms of Unemployment in Developed vs. Less Developed countries
developed :
- structural
- cyclical
- technological
less developed :
- frictional
- seasonal
- imported cyclical
- cyclical
