Limitations to Unemployment:
- Methods of measurement
- Geographic disparaties
- Age disparaties
- Ethnic differences
- Gender disparaties
Costs of Unemployment:
- People
- Society
- Economy as a whole (actual output is less than potential output on PPC curve)
Causes of Unemployment -- Disequilibrium Unemployment- when conditions prevent the labor market from reaching equilibrium
(1) Real-Wage Unemployment
- Can be caused by trade unions and government minimum wage interference
- Higher enforced wage, therefore creates unemployment
Solutions
- Government should reduce the ability of unions to negotiate higher wages
- Minimum wage reduced or even abolished
Concequences
- Having no unions affect the workers because they reduce the income that is low already and gives them less rights
- Greater inequity (worse distribution of income)
(2) Demand-deficient unemployment
- The economy grows slower, AD decreases because consumers spend less on goods and services
- Decrease in demand for labor (unemployment)
- To reduce output, firms will reduce demand for labor
Solutions
- Goverment intervention
- Increase AD by fiscal or monetary policies
(3) Equilibrium unemployment
- Even at equilibrium there can be unemployment where jobs exist, but the people are either unwilling or unable to take them
- As any given wage rate, there will be more people looking for jobs than those who are willing and/or able to take jobs
- There are jobs available, but still there is unemployment
- 3 types of this unemployment: frictional, seasonal, structural
Solutions: free market policies
- Reduce frictional unemployment
--> Cut unemployment benefits down
--> People take jobs that are more available
- Argue against union's intervention
(4) Frictional Unemployment
- Short-term unemployment (when people are in between jobs or have left school and are looking for first job)
- Natural unemployment - not negative
Solutions:
- Lower unemployment benefits for more motivation
- Improving the flow of information from potential employers to people looking for jobs
(5) Seasonal Unemployment
- Demand for certain workers falls at certain times of the year
- Climate factors --> no lifeguard in the winter
Solutions:
- Encouraging different jobs during off-season
(6) Structural Unemployment
- Result of changing structure of an economy
- Permanent fall in demand for a particular type of labor
- Results in long-term unemployed
Causes:
- New technologies can make some labor unnecessary
- Demand for labor can decrease because there is cheaper labor in other countries
- Changes in consumer tastes (ex. Eco friendly, structurally unemployed coal miners)
Solutions:
- Using intervention
- Long term education systems to teach people skills for different jobs
- Adult training programs
- Subsidize firms for worker training
- Encourage mobility to new job
- Apprenticeship programs - get a job elsewhere
streda 26. októbra 2011
štvrtok 20. októbra 2011
Five Types of Unemployment Stories
Real-Wage Unemployment
This type of unemployment can be caused by trade unions and government interference. Steven Sanders is an employe at Coffee & Co in the UK. On his first day he was approached by the work force union asking him if he wanted to be a part of the union. He accepted because they ensured a stable wage as well as protection against unjust discrimination or any kind of unfair treatment of the worker by the employers. All seemed well, Steven Sanders had a steady job with a steady wage rate. Little did he know the union he belonged to was creating real-wage unemployment. Since the union at Coffee & Co was demanding a wage higher than what would be the equilibrium wage, this situation creates unemployment because there is less money to be spent on additional workers. One solution Coffee & Co could do would be reduce the ability of unions to negotiate higher wages or give the unions less power over wages.
Demand-deficient Unemployment
This type of unemployment happens specifically when an economy's growth dwindles. The aggregate demand decreases therefore the demand for labor decreases as well. Jodie Lisbon is a mother of two who just finished her maternity leave and is seeking a job, she in counted under the unemployment census. Before she had children, Jodie quit her previous job working at Tesco and now she is looking for a job in a similar field, without much luck. She in unemployed because the economy's aggregate demand has fallen and companies are trying to reduce their output, so the demand for hiring new workers is lower than previously. Unfortunately, there is nothing Jodie herself can do in her situation, she can continue searching for a job but the government is the one that needs to intervene with the labor force market and try to increase aggregate demand by either using fiscal or monetary policies.
Equilibrium Unemployment
This type of unemployment happens when jobs exsit, but people are either unwilling or unable to take them. If they did, there would be full employment. Jose Bianco is looking for a job in Spain. He lives in the second largest city in Spain. Since he is seaking a job, he is unemployed. There are jobs available in Spain at the moment but Jose is unwilling to take them since they are in the capital city and he doesn't wish to commute that far every morning.
Frictional Unemployment
Frictional unemployment is a natural type of unemployment that happens when people are in between jobs. It is not the most negative type of unemployment because in any time in the economy, there will always be unemployment. Short term unemployment happens when people are in between jobs or when people left school and are currently searching for a job. Since these people will most likely get the job they are seaking or a job in general, they will not be unemployed for a long time. Also, these people have the necessary training and skills for a higher paying job in the future.
Seasonal Unemployment
Seasonal unemployment happens when the demand for certain workers fall at certain times of the year. Steve is a ski instructor who works for six months during the year. He loves his job but unfortunately, for half of the year he is unemployed. Although the government can intervene and provide information for jobs during the year informing him about other options, since Steve is unemployed, there is unemployment in the economy, seasonal unemployment.
Structural Unemployment
Structural unemployment is perhaps the worst type of unemployment. It happens as a result of the changing structure of an economy when there is a permanent fall in the demand of a type of labor. For example, Jim was a bank teller for over 50 years at the National Bank of Zimbabwe. Last year, the bank introduced 7,000 new ATM machines. This caused the unemployment of 7,000 Zimbabwean bank tellers. Since there is a permanent fall of demand for bank tellers, these bank tellers are unemployed because they are most likely searching for a job in their field, since that is what they are trained for.
This type of unemployment can be caused by trade unions and government interference. Steven Sanders is an employe at Coffee & Co in the UK. On his first day he was approached by the work force union asking him if he wanted to be a part of the union. He accepted because they ensured a stable wage as well as protection against unjust discrimination or any kind of unfair treatment of the worker by the employers. All seemed well, Steven Sanders had a steady job with a steady wage rate. Little did he know the union he belonged to was creating real-wage unemployment. Since the union at Coffee & Co was demanding a wage higher than what would be the equilibrium wage, this situation creates unemployment because there is less money to be spent on additional workers. One solution Coffee & Co could do would be reduce the ability of unions to negotiate higher wages or give the unions less power over wages.
Demand-deficient Unemployment
This type of unemployment happens specifically when an economy's growth dwindles. The aggregate demand decreases therefore the demand for labor decreases as well. Jodie Lisbon is a mother of two who just finished her maternity leave and is seeking a job, she in counted under the unemployment census. Before she had children, Jodie quit her previous job working at Tesco and now she is looking for a job in a similar field, without much luck. She in unemployed because the economy's aggregate demand has fallen and companies are trying to reduce their output, so the demand for hiring new workers is lower than previously. Unfortunately, there is nothing Jodie herself can do in her situation, she can continue searching for a job but the government is the one that needs to intervene with the labor force market and try to increase aggregate demand by either using fiscal or monetary policies.
Equilibrium Unemployment
This type of unemployment happens when jobs exsit, but people are either unwilling or unable to take them. If they did, there would be full employment. Jose Bianco is looking for a job in Spain. He lives in the second largest city in Spain. Since he is seaking a job, he is unemployed. There are jobs available in Spain at the moment but Jose is unwilling to take them since they are in the capital city and he doesn't wish to commute that far every morning.
Frictional Unemployment
Frictional unemployment is a natural type of unemployment that happens when people are in between jobs. It is not the most negative type of unemployment because in any time in the economy, there will always be unemployment. Short term unemployment happens when people are in between jobs or when people left school and are currently searching for a job. Since these people will most likely get the job they are seaking or a job in general, they will not be unemployed for a long time. Also, these people have the necessary training and skills for a higher paying job in the future.
Seasonal Unemployment
Seasonal unemployment happens when the demand for certain workers fall at certain times of the year. Steve is a ski instructor who works for six months during the year. He loves his job but unfortunately, for half of the year he is unemployed. Although the government can intervene and provide information for jobs during the year informing him about other options, since Steve is unemployed, there is unemployment in the economy, seasonal unemployment.
Structural Unemployment
Structural unemployment is perhaps the worst type of unemployment. It happens as a result of the changing structure of an economy when there is a permanent fall in the demand of a type of labor. For example, Jim was a bank teller for over 50 years at the National Bank of Zimbabwe. Last year, the bank introduced 7,000 new ATM machines. This caused the unemployment of 7,000 Zimbabwean bank tellers. Since there is a permanent fall of demand for bank tellers, these bank tellers are unemployed because they are most likely searching for a job in their field, since that is what they are trained for.
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