1. Disincentive to work, i.e. the government pays their keep, they are better off unemployed than having a low-paying job and pay taxes and still be in the same economic state.
2. Drop in demand of their product. So for example big British industries such as the chemicals and steel industry have declined, so people have been laid off because the output required needs few workers.
3. Similarly the rise of new technology means that many peoples jobs have been taken over by machines, for example the farmhand has been replaced by the combine harvester and cow milking machine etc.
4. The trade unions have forced up the wages of their members, creating an unnatural strain on a companies finances, meaning they will have to lay off some of their workers.
5. People in transition from one job to another, so people like newly graduated people etc.
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1 comment:
The question of why people are unemployed is an interesting one. A related question, though, concerns the portion of unemployment will return to productive work through policy action.
Economists believe that even if an economy reaches "full employment", there will still be some unemployed ("structural unemployment"). Popular theories tie the employment rate to the rate of inflation. According to Tobin, if the GDP is equivalent to potential output (i.e., inflation is stable), the economy has reached full employment allowed by its structure. Full employment is also known as the Non Acceleration Inflation Rate of Unemployment (NAIRU).
Yet the question of structure arises again. What parts of the current economic structure exacerbate unemployment? In the US, we have unemployment insurance (transfer payments from the employed to those out of work) and a minimum wage (a wage floor). Whatever their merits, it can be argued that both of these policies lead to a higher rate of structural unemployment than would otherwise exist.
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