Unemployment

Unemployment

1. Define as the situation in which people who are willing and able to work cannot find work

2. Classify into voluntary unemployment, involuntary unemployment and underemployment

   • created when labour chooses not to take up the available employment, anticipating that better jobs can be found
   • created when labour is willing and able to work but cannot find any available job
   • the ability of labour to obtain employment but is not being used to maximum ability

3. opposite of Full employment

   • refers to a situation where all who are able and willing to work can find work or where all productive resources are fully employed
   • Even at full employment, there is still some form of unemployment in the economy which is known as natural rate of unemployment at about 1% - 4%

4. Natural rate of unemployment

   • Structural unemployment
     • refers to the mismatch between the skills possesed by the retrenched workers and those required by new industries.
       • caused by geographical immobility
         • occurs when the skills possessed by the retrenched workers are not required in the immediate vicinity, and the retrenched workers are unable or unwilling to travel far away to seek emplyment
       • caused by occupational immobility
         • refers to the situation where the skills possessed by the retrenched workers are no longer required by the economy and they have to learn new skills
     • Occurs when there is changes in the structure in the economy
     • Occurs when there is changes in demand conditions
       • Permanent fall in demand due to Tech advancement, Change in taste and preferences, Availability of cheaper and better import, Loss of price competitiveness of exports, Importing countries producing substitutes.
     • Occurs when there is changes in supply conditions
       • eg. exhaustion of mineral deposits - firms forced to shut down - workers are restrenched
     • Remedies
       • Retraining and re-education
         • Government can provide and fund education, retraining facilities and assistance to the structurally unemployed to allow them to obtain the skils required. eg. Singapore Workforce Development Agency
       • Protectionist measures
         • Government can discourage demand for imported goods by imposing import tariffs and encourage the consumption of locally produced goods.
       • movement or resources
         • To deal with geographical immobility, the governenment could provide financial assistance to move labour to areas where there are jobs or to encourage firms to set up new businesses in such areas