Unemployment: Unemployment and Minimum Wage Rate Essay examples

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Unemployment is defined of those who are of working age and are actively seeking employment but do not currently have a job. It can be calculated using the ILO labour force survey or by looking at the claimant count. There are two major causes of unemployment, that caused by low aggregate demand and that caused supply problems in the economy.

One obvious cause of supply related unemployment is structural unemployment caused by immobility of labour. This unemployment results because although jobs exist in the economy, those who are unemployed are not suitably qualified, trained or situated to take them. Obviously a suitable policy such as the ‘training’ could have contributed to reducing unemployment in the UK. Providing cheap housing in areas where jobs are located could also help to relieve location related structural unemployment. It is important to consider however that policies such as training are very broad policies attempting to solve what may be quite a complex problem. Some jobs may require very advanced training, or may be in locations that people are not willing to travel to, regardless of salary or living costs. As a result such polices may be of limited success. Such policies also may be expensive to run and may not be an efficient use of resources.

Another common supply side unemployment problem comes as a result of frictional unemployment. This occurs where workers voluntarily leave their jobs to search for a better one. One way to combat this would be to remove benefits paid to those who are unemployed in this way to encourage others not to leave their jobs without another secured. Another policy, which could help in this situation, would be to better publicise the availability of jobs to workers. This could help people to realise the possible job opportunities before they left their current job. These policies are likely to be fairly effective at discouraging frictional unemployment, however there is the question of whether it is fair to remove state benefits to those who have become unemployed in this way.

Classical unemployment is another example of a supply related unemployment problem. It occurs when the wage rate in the
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