The paper "The Effect of Unemployment, Rate of Unemployment in Australia" is a perfect example of a macro and microeconomics assignment. Unemployment is defined as the situation that arises when a person who is actively looking for work, and who is available to take a job remains without work (Australian Bureau of Statistics 2007). On its part, the unemployment rate is the total number of unemployed people measured as a percentage of a country’ s total workforce (Australian Bureau of Statistics 2007). Different types of employment include structural unemployment, frictional unemployment, and cyclical unemployment.
According to Mankiw (2007, p. 206), frictional unemployment occurs because it usually takes time for people to find employment where they can utilize their skills or work that suits their tastes and preferences. On the other hand, structural unemployment is defined as the unemployment that occurs when jobs are inadequate, and therefore, everyone who needs a job cannot find one (Krugman & Wells 2006, p. 371; Mawkin 2007, p. 207). The foregoing definition suggests that economies will always have unemployment even when there are no job shortages because of frictional unemployment. Cyclical unemployment and the normal rate of unemployment are further definitions used to explain unemployment.
According to Mankiw (2007, p. 206), the natural rate of unemployment refers to the normal rate at which unemployment in any given economy fluctuates. However, any deviations that occur from the natural rate of unemployment are referred to as cyclical unemployment (Kugman & Wells 2006, p. 373; Mankiw 2007, p. 206). According to Frank and Bernanke (2007, p. 333) combining both frictional and structural unemployment provides an understanding of what the natural rate of unemployment is at any given time.
In figure 1 below, natural unemployment is represented by Q2 – Q1. Cyclical unemployment on its part is affected by business cycles and can either be negative or positive depending on whether the economy has contracted (in which case the cyclical rate would be positive) or expanded (in which case the cyclical unemployment rate is negative). Positive cyclical unemployment basically means that unemployment is more than the natural rate of unemployment, while a negative indication would mean that unemployment is lower than its natural rate (Levernier & Yang 2011, p.
68). As argued above, the time that people take to get employment is one of the main causes of unemployment. Additionally, there are times (and usually this is often the case), where the available jobs are too few for all the job seekers that an economy has. According to Uddin and Uddin (2013, p. 398-399), the latter form of unemployment is occasioned by a combination of factors that include rapid population growth, government policies that affect an economy’ s potential to create employment, the skills possessed by the job seekers, and rural-urban migration among other factors that affect the economy. The effect of unemployment from an economics perspective is perhaps best understood from the assumption that employment guarantees people of a monetary resource through salaries and allowances.
Therefore, unemployment would mean that the jobless would not have money to spend, and this would lead to an economic loss for the larger economy. As Welch and Welch (2009, p. 105) aptly put it, “ unemployment intensifies the scarcity problem” . Additionally, unemployment limits an economy’ s output since people who are jobless cannot contribute to the economic wellbeing of the economy.
If anything, they become dependent on either social welfare services provided by the government or on other people who are employed and by doing so, place an economic burden on the people or institutions they depend on. Unemployment also increases individual hardships as the unemployed struggle with scarcity. This can lead to emotional, physical and psychological stress, which would lead to diseases such as depression, mental instability or even suicide – all which have an effect on the economy (Welch & Welch 2009, p.
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