Wednesday 18 March 2009

Unemployment

Unemployment refers to people who are out of work but are willing and able to work.There are 7 types of unemployment.
  • Cyclical, unemployment due to a lack of aggregate demand.
  • Structural , due to the decline of industries and occupation due to the change in demand and supply.
  • Frictional, short term unemployment when people in between jobs.
  • Seasonal, vocational jobs due to a sudden demands for certain time of the year only
  • Technological , people lose their jobs because of the advance of technology.
  • International, the firms move to other country, because people decide to buy imports rather than domestically produced product.

The consequence of unemployment:

  • Loss in tax revenue. Basically, unemployment caused the tax revenue from income or goods and services being lower than it could be.
  • Lost on output. people who are willing and able to work but are unemployed, is a waste of labour resource, the actual output will be less than potential output.
  • Government spending. Government have to spending more on benefit for unemployment such as job seeker`s allowance. Therefore, other sectors of government spending (health, education etc) have to reduced.
  • Pressure on government spending. It is because when people are unemployment, they are more likely to suffer health problems and even crime. So government might have to increases their spending in these areas.
  • Costs of unemployed. An loss in income as they got less in job seeker`s allowance than wages. Unemployment might causes family break-up and etc.
  • Hysteresis. unemployment cause unemployment. The longer people are out of work, the longer for them to gain a job. They might have forgotten the skills to use for work, or left a impression to employer that he/she is not a good worker.

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