The Causes of Unemployment
- The causes of unemployment can be examined from the demand side and the supply side.
- Cyclical unemployment is unemployment arising from a lack of aggregate demand
- This can be represented on a diagram by YFe (output when full employment) being the inelastic upwards slope of the AS curve. Unemployment will be the amount between this full-employed level and where AD currently meets AS.
- Structural unemployment is unemployment caused by the decline of certain industries and occupations due to changes in demand and supply.
- g. employers may not want to hire certain people because they lack the right skills
- Or there are job vacancies in one part of the country, but the unemployed are in another
- The aforementioned are also occupation and geographical immobility of labour.
- Technological unemployment arises when workers lose their jobs due to advances in technology
- International unemployment is when a firm decides to outsource its labour, or households decide to buy imported goods instead of domestic goods.
- Frictional unemployment is short term unemployment occurring when workers are in-between jobs.
- This is always likely to exist in an economy