i can’t wait to be structurally unemployed. (Chapter 13 Q & A)

25/02/2013 § Leave a comment

#1. 25 marks.

a) Distinguish between structural unemployment, frictional unemployment and seasonal unemployment.

Structural, frictional and seasonal unemployment are all part of a nation’s NRU: natural rate of unemployment. Even when a nation is producing at a level of full employment, there is a small amount of unemployment that is natural and that the nation desires.

Structural unemployment occurs when a worker loses his job due to the changing structure of a nation’s economy. His unemployment is normally the cause of globalization or the improving development of his nation’s economy. Naturally, as a nation further develops its economy and becomes more globalized and attuned to the financial ways of other, more modernized nations, some lines of work will have to be cut off since the type of labour or service they provide is no longer desired. The range of development usually starts from the labor farmers offer to the type of manufacturing work that factory workers offer, and finally to the type of work from large service sector that more educated and skilled workers can offer. We can see the clear increase of the level of skills and intelligence needed in the workers as the nation’s GDP develops. A factory worker then who used to work at a plant that contributed to the economy of a developed nation that is well on its way to further improve its economy might then get laid off naturally as the nation starts to diminish its need for factory workers and increase its need for service sector workers. The ways a nation can reduce its amount of structural unemployment would be to invest in public education and training for adult workers for the long run, to train the workers for the newer jobs, and to generally improve their education so that when it’s time for them to work, they will already be ready.

Frictional unemployment occurs when workers are in between jobs (looking for a new job) or entering the labour force for the first time. When (or if) I graduate from college and need to start looking for a job, I would be frictionally unemployed because I would be entering the labour force for the first time, looking for my first job. My family’s friend also recently quit one job voluntarily to look for another one because the previous job would mean that he and his family would have to move to Singapore and they preferred to stay in Japan. He was frictionally unemployed until he was able to find another job – luckily. The key to frictional unemployment is that the individual who is unemployed has skills that the nation’s current GDP makeup demand and there are jobs out there for that individual so they won’t stay unemployed for too long.

Seasonal unemployment occurs between the seasons, like with life guards, ski-lift operators, golf-course workers, etc. These are workers who are voluntarily unemployed whenever it isn’t their work’s season and who need to seek other employment between the seasons. These workers choose these certain jobs to allow for flexibility of time and location and in doing so, they voluntarily choose to be unemployed when it isn’t their season. Ways a nation can avoid seasonal unemployment, though it’s natural, would be similar to frictional unemployment: reduce unemployment benefits (so workers would be forced to find work faster) and improve the information symmetry between the employers and the unemployed.

b) To what extent is the existence of structural unemployment in a nation a sign of economic weakness?

As a form of natural unemployment, structural unemployment is the result of a changing and, more importantly, developing economy. When a nation experiences a bout of structural unemployment, the workers that are getting laid off and losing their jobs are the ones who can no longer offer what the developing economy requires of them. These typically consist of agriculture workers: farmers. An economy that starts to move towards manufacturing goods will no longer need the services of a farmer and agricultural workers would soon find themselves out of employment. However, the farmers’ misfortune can be part of the economy’s good fortune because though he loses his job and income, it means that the nation’s GDP is moving towards a more globalized makeup. One of the four main macroeconomic goals of a nation is economic growth and a growing and developing GDP indicates a clear move towards a better and stronger economy.

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