Why are some workers unemployed? This fundamental question raise some of the tho

Question

Why are some workers unemployed? This fundamental question raise some of the thorniest issue in economics. You are requested to explain why unemployed workers exist in terms of different types of unemployment and what attitudes of policy-makers are towards those various types of unemployment. Why are some workers unemployed? This fundamental question raise some of the thorniest issue in economics. You are requested to explain why unemployed workers exist in terms of different types of unemployment and what attitudes of policy-makers are towards those various types of unemployment.

Explanation / Answer

Workers are unemployed due to the many reasons. The first reason is the business cycle, different industries are going through. It creates recession or slow down in the economy and people get unemployed. The second reason is that people are changing jobs and while doing so, they remain unemployed for some time. It is called frictional unemployment. The third reason is that the skills owned by the people become obsolete due to the structural changes in the economy. It makes them unemployed. Here, unemployment due to the structural and frictional reasons are always present in the economy even if at the full employment level. So a natural rate of unemployment is the sum of frictional unemployment and structural unemployment. Though, the cyclical unemployment is due to the recessionary impact in the economy.
Government actively works to eliminate the cyclical unemployment and shows positive attitude in its policies to eradicate it. It applies expansionary fiscal policies and central bank to implement monetary policy to stimulate the economic activities and reduce the cyclical unemployment. Afterwards, the government works on unemployment due to the structural changes by bringing in changes in education and training programs, skill based courses and human capital development. Though, the structural unemployment will always be present in the economy. The government does not show up for those who are changing jobs and creating frictional unemployment.
So, it is said that full employment means economy is having structural and frictional unemployment.

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