Lesson 2: Types of Unemployment
Learning Objective: I can identify and explain the causes/consequences of unemployment.
Disequilibrium Unemployment: Occurs when there are conditions that prevent the labor market from "clearing" or reaching larbor market equilibrium.
Disequilibrium Unemployment: Occurs when there are conditions that prevent the labor market from "clearing" or reaching larbor market equilibrium.
- Real-wage Unemployment (Classical)
- Demand-deficient Unemployment or Cyclical Unemployment
Real Wage Unemployment (Classical) - Caused by trade unions and government minimum wages interfering with the labor market.
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Demand-deficient, Cyclical, Keynesian Unemployment - Cyclical downturns in the economy. AD decreases, less consumption. Fall in demand for labor, firms cut back on production.
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Solutions
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Equilibrium Unemployment (natural unemployment)
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Frictional Unemployment: Short-term unemployment that occurs when people are between jobs, or left eduction and waiting to take their first job.
- Easily recognized as natural unemployment as it is natural for people to leave jobs in hope of better ones.
- Reducing unemployment benefits.
- Improved access to job information; internet, newspaper, job centers.
Structural Unemployment: Permanent fall in demand for a particular type of labor.
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- Adult retraining programs.
- Subsidies to firms that provide training for their workers.
- If jobs exist in other parts of a country, a government might provide subsidies or tax breaks.
- Government support for apprenticeship programs.
- Reduce unemployment benefits.
- Deregulation of hiring, firing and employment practices.
Unemployment Project: Your assignment is to identify a country with high unemployment, summarize the situation, analyze, and evaluate potential solutions. You will be assessed using the Criterion B-E of the IA assessment rubric. Two articles need to be identified to support your analysis/evaluation, 4pts. Total = 15pts, due next Tuesday.