Unemployment Flashcards
Define unemployment
This is when an individual is willing and able to work but is currently unable to find a job at prevailing wages
Define underemployment
This refers to those who are over qualified for their current job. This also includes part time workers seeking full time jobs
List the types of unemployment
Frictional, Structural, Seasonal, Cyclical, Real Wage
What is frictional unemployment?
This type of unemployment occurs due to the time lag created when moving from one job to another. Those frictionally unemployed are usually said to be between jobs
What is structural unemployment?
This is when the structure of an industry changes. It occurs because of a mismatch between the skills required to perform a job and the skills workers possess
List some reasons why the structure of an industry may change
technological advancements may render workers as useless in the industry or can replace a product making it obsolete
falling world demand of an exported good
Define cyclical unemployment
This happens when there’s a decline in total spending. Since demand is decreasing firms will employ less of all factors of Production including labour
Define real wage unemployment
This occurs when trade unions succeed in raising the wage rate above the equilibrium level. This will cause a surplus in the labour force since the wage rate is above the equilibrium level and firms lay off workers to be able to pay the others.
What is the cost of unemployment?
lower output, lower tax revenue, increased welfare payments, human cost of unemployment
What is lower output?
This is the most basic economicncost of unemployment and it happens when the economy is operating within the ppf. When the economy fails potential production of goods and services is lost to create enough jobs for the unemployed
Demand side policies to address unemployment
Fiscal and Monetray policies
Supply side policies to address unemployment
Training and Retraining, Abolotion of wage floors, Reduction of employee and trade union rights
