United States Economic Systems, Part 4
Question 1: Define and give examples of seasonal unemployment and frictional unemployment.
Answer 1: Seasonal unemployment is the inevitable result of labor fluctuations during the course of a year. In agriculture, for example, employment increases a great deal during the peak harvest season and then decreases during the winter. In some cold climates, construction workers may be unemployed throughout the winter months. Frictional unemployment is the result of the huge numbers of people entering and leaving the job market at any given time. There is always a lag time between deciding to look for a job and finding one, and individuals experiencing this lag time are considered frictionally unemployed. Every economy has a bit of frictional unemployment, although some say that the policy of unemployment compensation in the United States encourages more frictional unemployment than is necessary.
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Question 2: Discuss structural unemployment.
Answer 2: Structural unemployment develops when changes in the industry result in a mismatch between the jobs available and the skills possessed by the workers. This has occurred in the United States’ shoe industry: Workers no longer have the training to operate the requisite equipment but still demand a higher rate of pay, so the jobs have gone overseas. Structural unemployment can last much longer than other forms of unemployment as workers struggle to acquire new skills. Some people suggest that the government could remedy this problem by helping to pay for structurally unemployed citizens to get the training they need, or for workers to move to locations where they can be paid for the skills they already have.
Question 3: Explain cyclical unemployment in detail.
Answer 3: Cyclical unemployment is a lack of jobs resulting from the lack of demand in an economy. Essentially, cyclical unemployment is the unemployment left over after all the unemployment for structural, seasonal, and frictional reasons has been taken out. Because most economic models suggest that the usual combined rate of unemployment by for structural, seasonal, and frictional reasons is six percent, any increase greater than six percent is considered cyclical unemployment. The government tries to increase aggregate demand and minimize cyclical unemployment through macroeconomic policy; most of the unemployment data collected by the government is actually aimed at minimizing cyclical unemployment. Every economy, however, will experience decreases in demand from time to time.
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