Unemployment
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Unemployment
Question One (2.5 marks)
Numerous factors are accelerating the rate of unemployment. Frictional unemployment is caused by people taking or moving between jobs. For example, when graduates switch between jobs, frictional unemployment occurs because of a lack of enough information to find the required work as per their academic credentials and professionalism. Structural unemployment has been caused by occupational mobility, such as challenges in learning new skills that are relevant in the industry. Any structural change in the economy, such as a decline in coal mines, makes it impossible for coal workers to find another job in new retail or computer industries. Real wage unemployment occurs when a competitive labor market is pushed above the equilibrium, such as the trade unionists’ actions. Voluntary unemployment occurs when people prefer not to get employed but instead depend on people’s benefits. Technological advancement is associated with unemployment. People with limited skills are laid off, such as the replacement of cashiers with self-service tills. It is part of structural unemployment.
Question Two (2.5 marks)
Covid-19 pandemic has caused disruptive changes in various industries leading to high rates of unemployment. Saudi Government should play a vital role in reducing the Corona pandemic’s ravaging effects on the economy. There should be economic stimulus packages for highly affected industries such as tourism and small and medium enterprises. The government can provide loans with zero interest rates to boost ventures highly affected by the pandemic. The formulation of fiscal and monetary policies is necessary for salvaging ailing economic status. For example, the government can enact legislation to reduce taxes on salaries and wages. This will increase the circulation of money in the economy. Fiscal policy will reduce unemployment by increasing aggregate demand and the rate of economic growth. Cutting taxes and increasing government spending is what the Saudi government should consider curbing unemployment’s skyrocketing rate. Lower taxes will increase the disposable income that can be used to create new temporary jobs.
References
Mankiw, N.G. (2011). Principles of Macroeconomics. Sixth edition. ISBN 13: 978-0538453066.