(b)(ii) Explain three other possible causes of unemployment. (6 marks)
Another possible cause of unemployment is residual unemployment. Residual unemployment is people who are sick or disabled who cannot get a job because entrepreneurs are not willing to employ them due to their condition. Therefore if there is a large percentage of ill or disabled people in the UK there could be a large residual unemployment, however this could be reduced if there are technological advancements that will help the ill or disabled to be able to work in the workplace.
As shown in extract 1 another possible cause of unemployment is structural unemployment. This occurs when there is a fundamental change in the structure of industry. The most common form of structural unemployment is regional unemployment where a part of industry is shut down and therefore causing mass unemployment. This generally happens in one area. The region is generally dependant on this industry and therefore this can cause a multiplier in the area due to the decline of the income caused by the loss of the main industry and this therefore can cause cyclical unemployment. Another type of structural unemployment is international unemployment where workers lose their jobs due to a fall in demand in domestically produced goods. The final type of structural unemployment is technological unemployment, where workers lose their jobs due to the introduction of new technology.
Another possible cause of unemployment is seasonal unemployment, where workers are only needed to work in a certain period or periods of the year. This unemployment particularly happens in the farming industry and tourism industry where some farm workers are only needed at harvest and the reduction in tourism in the winter causes people to be unemployed. Therefore if the UK had a large farming industry or a large tourism industry they may find large unemployment levels at the certain periods of the year.
(c) Discuss the policies the government should adopt if it wishes to achieve a low level of unemployment. (20 marks)
There are many polices that the government can adopt to achieve low unemployment. These policies depend on the government’s view of how unemployment should be handled and which type of unemployment is occurring in the UK.
If unemployment is cyclical unemployment, the government can use two different policies to ensure low unemployment levels. Cyclical unemployment occurs when there is a shortage of aggregate demand; therefore the government must try and encourage an increase in demand. To do this the government can use the policy of the Keynesian multiplier. Where the government makes jobs available through various new industries for example building public buildings. This immediately reduces unemployment, however, the reduction in unemployment doesn’t stop there. The creation of these jobs also allows these people to have a larger disposable income, therefore these workers can now afford more and therefore aggregate demand will increase. Due to this increase in aggregate demand more jobs will be created as entrepreneurs will increase supply to feed this new demand and therefore these new workers will have a larger income. This therefore will create an even larger aggregate demand, which will of course create new jobs and further decreasing unemployment. The Keynesian multiplier will continue creating more jobs due to the increase in aggregate demand. This policy is generally used by a left wing government.
The more right wing approach to achieve low levels of unemployment, when cyclical unemployment is present, is to encourage consumers to not save their money but to spend their money to try and create aggregate demand, which will therefore create jobs. To do this the government will not get directly involved but will try and encourage the spending. This encouragement will create spending and therefore create jobs, which will achieve low levels of unemployment.
Overall I believe that the left wing approach to achieve low levels of unemployment when cyclical unemployment is present are better as the left wing approach achieves low levels of unemployment much faster than the right wing approach. This is because the left wing approach will achieve the creation of jobs immediately.
If the unemployment present is structural unemployment, then again the government can use two different policies to achieve low levels of unemployment. The left wing policy would be (see Ex book)
The other policy to achieve low levels of unemployment, the more right-wing approach, is to encourage the unemployed to work. To do the government will again not get directly involved in getting the unemployed to work but will encourage the unemployed to be retrained in other industry or move geographically to acquire a new job.
If the unemployment present in the UK was residual unemployment, then the government could use two different policies to achieve low levels of unemployment. The left wing policy would be
Finally, if the unemployment present was seasonal unemployment, then again the government could use two different policies to achieve low levels of unemployment. The left wing policy would be]
Overall, I believe that the left wing policies are better at achieving low levels of unemployment than the right wing policies.