Sunday 15 March 2009

Unemployment

Unemployment is a situation where people in the working age are out of work but are willing and able to work and get Job Seekers Allowance. There are different types of unemployment.
 Cyclical unemployment occurs because of lack of aggregate demand in the economy. Also this kind of unemployment is called demand deficient. It is usually associated with economic recessions when there is an inflation and economy works in spare capacity and there are many manufactures’ closures and thereby workers’ lay-offs. 
Fricitional unemployment rises when workers are in between jobs. For example, they moved to another area of living or they are graduates and just joined labour market. It takes time while they find appropriate job with a preferred salary. Government might use more information and improve trainings for workers in order to reduce frictional unemployment. However this type of unemployment is not so dangerous like others. 
Structural unemployment occurs because of decline in certain industry or substitution by capital goods of labour. Because of decline in particular industries such as manufacturing (coal, steel, etc.) usually lead to unemployment. However if government will improve its training programs for workers in order to give them opportunity to find job in another sphere might help to reduce unemployment.
Technological unemployment arises from advances in technology which usually leads to an increase in potential output. Measures to correct this type of unemployment are similar with structural. 
International unemployment might appear when some firms decide to move abroad and produce their goods there, and for them it would be cheaper to hire workers in that area; also if households will switch on buying imported goods and so demand for domestic goods will decrease and this will lead to unemployment. Government need to encourage more small firms in order to increase their competitiveness and demand for them. 
Also even if unemployed are those who want and able to work, there will an amount of people who would like to avoid work and live on Job Seekers Allowance. This hidden unemployment might occur because people have been out of work for a long time and lost their motivation and skills needed to apply for a job and they just give up seeking for a job. Also others may think that with their skills they will not be able to find a job with an appropriate salary and JSA is enough for them to live.
To measure unemployment different countries use their own systems. In the UK unemployment is measured by Labour Force Survey and claimant count, that is a measure of unemployment that includes those receiving benefits. However there are lot of difficulties with measuring unemployment such as whom to consider as unemployed because some people are actively seeking for a job but don’t get benefits; others live on Job Seekers Allowance but aren’t interested in finding job. 

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