Frictional And Structural Unemployment

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Frictional unemployment, structural unemployment, cyclical unemployment, demand deficient unemployment and classical unemployment are the causes of unemployment. Even in a healthy economy, frictional and structural unemployment will also occur. Frictional unemployment is the portion of unemployment which exists in any economy due to people being in the process of moving from one job to another job. Frictional unemployment will always exist in an economy due to there are not perfect information and it takes time to find work. First, unemployment is voluntary. Some of the unemployed have saved enough money so they can choose to stop working without a job or stay unemployed. They have the luxury to search until they find just the right opportunity.…show more content…
It is neither voluntary nor short-term. These causes usually lead to long-term unemployment which can be caused by occupational and geographical immobility of workers, the investment needed to improve skills, provide appropriate and effective training and working experience to the unemployed so that they can move their location and move on as needed. Occupational immobility refers to the difficulties of adapting new skills applicable to a new industry and technological change. Geographical immobility refers to the difficulties in moving regions to obtain a job. Technological change means advances in technology. If some industries have moderated technology development, then the demand for labour will decline because robotics replacing jobs. Structural change in the economy means it is difficult for illiteracies such as coal miners to get jobs in new industries such as computers. Next is job outsourcing. That is, when the company transfers its manufacturing or call centre to another country. Costs of labour in countries with lower cost of living are…show more content…
When the real wage relative to the market clearing wages rose, the classical unemployment rate increased. Also known as the real-wage unemployment, the rise and fall of the classical unemployment rate is a function of the law of supply and demand. Workers are willing to accept wages (real wages) more than the employer is willing to pay wages (market cleaning wages), there will be classical unemployment. By definition, market clearing wages are balanced wages. In other words, the supply of labour is the same as the demand for labour. This relationship is shown below: In terms of market clearing wages (MCW), the demand for labour is exactly the same as that of labour, while classical unemployment is zero. When the real wage (RW) exceeds the market clearing wage (MCW), the classic unemployment rate is greater than zero. It sometimes occurs when wages are too high. This is one of the reasons against the increase in the minimum wage. Critics argue that when an enterprise is forced to pay a higher salary for everyone, it is necessary for other workers to go. In some price-sensitive industries, this is true. But most companies can pass on costs to
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