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Macro and Micro Economics - Essay Example

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Unemployment can be defined as the activity of people being out of employment without their own wish. Unemployment is mostly involuntary that is the person was employed before but is now out of work without his or her wish of being out of work …
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Macro and Micro Economics
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Download file to see previous pages Unemployment is mostly involuntary that is the person was employed before but is now out of work without his or her wish of being out of work (Walters, 2000;12). This perspective implies that the person though out of job is actually looking for one but the job is currently unavailable. According to Gupta’s (2004; 31) definition of unemployment, unemployment cannot be defined as every person who is not engaged in productive activity. According to him there are people who are sick and children who are too young to work but this does not mean that they want to engage in any worthwhile activity because either they cannot find one or they do not want to engage in one; this means they cannot be classified as being unemployed therefore the correct perspective of unemployment would be the number of productive workforce that are involuntary out of work. Most of the common unemployment forms are brought by the lack of demand of labour in most of the companies in any given economy. Unemployment can be divided into many categories with the first group being Voluntary while the second type of unemployment will be involuntary (Lindbeck, 1993; 77). The said group can also be divided further into smaller groups depending on the cause of unemployment. When it comes to voluntary unemployment one of the major causes is frustrations; when a person fails to get the coveted job for a long period of time the individual might opt out of the work force, this is done in order for the person to avoid embarrassment and also the stress associated with the process of looking for a job. Therefore the person can be classified to have left the work force and employment through frustration thus unemployment through frustration. Another cause of voluntary unemployment is when the person has been working at a particular firm and due to structural change the company chooses to pay some employees in order to leave the job on a good will basis (Asimakopulos, 1991; 123). In terms of involuntary unemployment there exist different categories with the most common types being classical, structural or mismatch, frictional also known as turnover and cyclical types of unemployment (Anderson, 1977; 29). In cases where the wage rates are not flexible there will be a further cause of unemployment called the wait. Cyclical or demand deficient type of unemployment refers to a situation where the rate of employment is entirely dependent on employment rates. According to Gillespie (2007; 31), a slow demand throughout the economy leads to deficiency. Case in point is where there is a recession or there is a negative GDP growth. Whenever there is a negative demand or a low demand for goods and services then the demand for labour will be low therefore less employees will be needed thus more unemployment. Keynesian Theory falls under the cyclical type of unemployment; Keynes (1930) explains that in the short run, productivity activities are influenced by the total spending in the economy which is the summative demand (Hein, 2011;189). This does not mean that the total spending of an economy is equal to the total productive capacity of the economy which is the summative supply. In its place it is subjected by a multitude of aspects and every now and then performs unsteadily, touching production, employment and inflation. In the structural unemployment, it transpires when the structure of economy is altered (Snower, 1997; 64). Case in point can be where an industry loses its international competitiveness with the arrival of new global competitors. The industry will ...Download file to see next pages Read More
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