Unemployment

‘Unemployment is best tackled through demand side intervention.’ Exam style question ‘Unemployment is best tackled through demand side intervention.’ Discuss (25 marks)

Why consider unemployment as an economic objective? Costs to the unemployed and their dependants Costs to local communities Costs to taxpayers Costs to the economy as a whole Altruism

Demand side causes of unemployment Increases and decreases in the components of aggregate demand that create fluctuations in the economic cycle. AD = C+I+G+(X-M) Known as cyclical or demand deficient unemployment. Price level LRAS AD1 AD2 Real output

Demand deficient unemployment http://www.bbc.co.uk/news/business-21292150

Supply side causes of unemployment Frictional or search unemployment Where individuals are in between jobs. Looking for better wages, new challenges or improved terms and conditions. Structural unemployment Unemployment caused by changes in the structure of the economy. In the U.K, deindustrialisation has seen the loss many of traditional primary and secondary industries. In most cases they have left highly skilled individuals unable to take up vacancies that were then created in the fast emerging tertiary sector. Geographic and occupational immobility of labour make ameliorating this type of unemployment more complex than just initiating fiscal or monetary expansion. Voluntary unemployment Individuals that deem the current rates of pay too low sacrifice any potential benefits that may be available when out of work. This is often a problem faced by those who are likely to enter the job market on the lowest incomes. Taxation, the loss of benefits, work related costs and opportunity costs all play a factor in discouraging individuals to take up employment. Geographic immobility of labour:- where workers find it difficult to move to where employment opportunities exist. This maybe due to family ties or differences in the cost of living. Occupational immobility of labour:- Often a ensues as a result of structural unemployment where workers may find it difficult to secure new jobs due to a lack of necessary skills. Here vacancies may exist, but there is a mismatch between those needed and what Is on offer.

Youth unemployment http://www.bbc.co.uk/news/business-18085174

Tackling supply side causes of inflation http://www.bbc.co.uk/news/uk-wales-17600117

Tackling unemployment https://www.youtube.com/watch?v=YYuW2S6Jnxo