Unemployment 2.3

IA Practice:

Read together: The Problem with Unemployment Indicators

Why would the government want to report a lower unemployment rate?

Individual Work Find a different article about the costs of unemployment to society/individuals/the economy (you can focus on one or more of these). Then write your OWN practice IA.

Prepare to share next class or at the end of class if there's time.

Part 2: Unemployment: Types, Causes and Dealing with it

Goals for the day:

Types and causes of unemployment

• Describe, using examples, the meaning of frictional, structural, seasonal and cyclical (demand-deficient) unemployment.

• Distinguish between the causes of frictional, structural, seasonal and cyclical (demand-deficient) unemployment.

• Explain, using a diagram, that cyclical unemployment is caused by a fall in aggregate demand.

• Explain, using a diagram, that structural unemployment is caused by changes in the demand for particular labour skills, changes in the geographical location of industries, and labour market rigidities.

• Evaluate government policies to deal with the different types of unemployment.

Types of Unemployment review videos (optional)

More examples of natural unemployment with potential solutions:

Should all students go to college to get a job? (this program would target both frictional AND structural unemployment)

Does removing medicaid benefits for the unemployed increase the AS of Labor? (this would be a neo-classical solution to a low ASL.)

Review Goals for today:

• Describe, using examples, the meaning of frictional, structural, seasonal and cyclical (demand-deficient) unemployment.

• Distinguish between the causes of frictional, structural, seasonal and cyclical (demand-deficient) unemployment.

• Explain, using a diagram, that cyclical unemployment is caused by a fall in aggregate demand.

• Explain, using a diagram, that structural unemployment is caused by changes in the demand for particular labour skills, changes in the geographical location of industries, and labour market rigidities.

• Evaluate government policies to deal with the different types of unemployment.

Examination Questions: (From Oxford revision guide)

Paper 1, part (a) questions (10 marks each)

1. Explain the cause of demand deficient unemployment.

2. Explain two possible causes of structural unemployment.

3. Explain the costs associated with unemployment.

4. Explain the difficulties involved in measuring the exact level of unemployment.

5. Explain two policies that might be used to reduce the Natural Rate of Unemployment (NRU).

6. HL: Explain crowding out.

7. HL: Explain how automatic stabilizers may reduce the effectiveness of fiscal policy.

Paper 1, part (b) questions (15 marks):

1. Using real-world examples, evaluate the effectiveness of demand-side policies in reducing unemployment.

2. Using real-world examples, evaluate the effectiveness of supply-side policies in reducing unemployment.

Paper 2 (4 mark question)

Unemployment increases as technology blossoms:

Over the past five years, improvements in technology and increases investment by a large proportion of the major companies in the garment industry have led to a significant decrease in employment. This is a concern for the government.

Using a labour market diagram, explain the type of unemployment that has occurred in the garment industry.

Paper 2 (4 mark question)

Economy is moving into recession

In the last two quarters, economic growth has been -0.25% and -0.5%, respectively. This is proof that the economy is now in recession. The biggest effect of this is to be seen in the labor market, where the unemployment rate has increased from 12% to 13.5% in the last year. It is essential that the government addresses this problem.

Using an AD/AS diagram, explain the type of unemployment that has occurred in the economy.