Comments
Real wage unemployment
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– This is found in industries that are highly unionised.
– Union negotiations keep wages artificially high using the threat of industrial action, such as strikes. The high wages bill that this creates means that the number of people employed by the industry is reduced.
– Monetarists would see this as a market imperfection and would look to reduce union powers and abolish minimum wage agreements.
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Frictional
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– This refers to people who are short-term unemployed as they move between jobs.
– It is not normally seen as a problem, but can be reduced by increasing the information unemployed people receive about job opportunities (a supply-side policy).
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Seasonal
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– This occurs naturally in some industries, where demand for goods is highly seasonal, for example in tourism and farming.
– This can create economic problems in regions that rely heavily on such industries.
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Structural
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– This occurs when there is a structural change in the economy, leading to a change in the skills required and the location where economic activity takes place. – Boosting aggregate demand (a Keynesian policy) will have little impact on this type of unemployment. Monetarist policies are likely to be more effective – such as: government funded retraining schemes , tax breaks for redeveloping old industrial sites – business start-up advice and loans.
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Technological
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This is a form of structural unemployment, which occurs when new technologies are introduced. (a) Old skills are no longer required. (b) There is likely to be a labour saving aspect, with machines doing the job that people used to do. With automation, employment levels in an industry can fall sharply, even when the industry's total output is increasing.
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