Solutions for Reducing Unemployment

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