Economics Tutorial: Unemployment

Asyrafi 2T24 The community college system is one of Americas underappreciated assets, . I urge the states to allow the jobless to get the education and training they need for a better job, without losing their unemployment benefits. a) Explain the likely causes of unemployment in Singapore. [10]

b) Assess whether Singapore will solve the problem of increasing unemployment differently from the USA. [10]

a) In Singapore, there are many factors that can cause unemployment. First of all, Singapore is a country that develops at a very fast rate with the main industry shifting more towards the higher-end manufacturing and services sector. This change in the kind of job and the level of skill required for the jobs may cause frictional unemployment. Frictional unemployment is associated with the normal turnover of labour. It arises during the time required to match qualified job seekers with available openings. People who change their jobs, voluntarily or otherwise, and school leavers seeking for jobs may be unemployed temporarily for a period of time. Job seekers need time to search for unemployment opportunities, and firms need time to find suitable employees. The time required bringing together employers and employees causes frictional unemployment. This occurs due to imperfect knowledge in the labour market. Employers are not fully informed about the type of labour that is available and workers are not informed about what jobs are available, hence the search. Some form of frictional unemployment is inevitable because the economy is dynamic in terms of changing demand for labour among different firms and due to the existence of mismatch between jobs available and personal choices of individuals. The extent of this form of inevitable frictional unemployment would contribute towards determining the level of natural rate of unemployment. However, if government policy can help to reduce the search time it takes unemployed workers to find new jobs, this will help to reduce the natural rate of unemployment. Besides that, Singapore can also be affected by cyclical unemployment where it is associated with the business cycle. It increases during recessions and decreases during expansions. Cyclical unemployment occurs during the downswing of the business cycle. It is the results of a deficiency in aggregate demand. During the downswing, aggregate demand is insufficient to purchase all of the economys potential output. Firms will have excess stock as they cannot sell their current output. Hence, firms will reduce production and reduce their demand for inputs including labour, resulting in

a rise in cyclical unemployment. This situation is made worse through the interaction of the multiplier and the accelerator. Also, structural unemployment may also arise in Singapore when there is a mismatch between the kinds of jobs offered by employers and the skills, experience, education and geographical location of job seekers. This results from the changing structure of the economy (can be demand side or supply side) and the difficulty and inability of the workers with specific skills to find alternative employment. On the demand side: Structural unemployment occurs due to the changes in tastes, technology, taxes, or competition reduce the demand for certain skills and increase the demand for other skills. When a firm or industry becomes less competitive as a result of a permanent fall in the demand for its goods and services, production will be cut back, leading to a decrease in the demand for labour. However, many displaced workers may not be easily and readily absorbed into other industries, as they may not have the skills demanded by theses industries, leading to structural unemployment. With the growth of international competition, this has become an important cause of unemployment. This is seen in many developed countries where the industries have shifted their labour intensive production bases to countries where the production costs are lower. Workers become unemployed, as there are no jobs at all pr they lack the skills required or they are unwilling to accept other jobs that pay less. On the supply side: There may be changes in the techniques of production. Technological unemployment is a type of structural unemployment resulting from the successful growth of new industries using labour-saving technology such as automation. b)