Page 71 - DECO303_INDIAN_ECONOMY_ENGLISH

Indian Economy

Notes 2. Structural: Structural unemployment arises when definite industries decline because of
long term variations in market conditions.

Example: Over the last 20 years UK motorized automobile manufacture has weakened
while car production in the Far East has augmented, creating organisationally unemployed car
workers.
Globalisation is progressively important reason of physical unemployment in many
countries.
3. Regional: When structural unemployment disturbs local areas of an economy, it is called
‘regional’ unemployment.

Example: Unemployed coal miners in South Wales and ship workers in the North East
add to regional unemployment in these areas.
4. Classical: Classical unemployment is instigated when salaries are ‘too’ high. This
description of joblessness controlled economic theory before the 1930s, when workers
themselves were responsible for not tolerant lower wages, or for asking for too
extraordinary wages. Classical unemployment is also called real wage unemployment.
5. Seasonal: Seasonal unemployment occurs because certain industries only harvest or allocate
their products at certain times of the year. Industries where periodic joblessness is mutual
include farming, tourism, and construction.
6. Frictional: Frictional unemployment, also named as search unemployment, arises when
workers lose their current job and are in the process of finding another. There may be little
that can be completed to decrease this type of unemployment, other than deliver better
evidence to reduce the search time. This proposes that full time employment is not possible
at any one time because certain workers will continuously be in the process of changing
jobs.

7. Voluntary: You must understand that voluntary unemployment is defined as a condition
when workers select not to work at the current equilibrium wage rate. For one purpose or
another, workers may select not to contribute in the labour market. There are numerous
reasons for the presence of voluntary unemployment containing extremely large well-
being assistances and high rates of income tax. Voluntary unemployment is probable to
occur when the equilibrium wage is below the wage essential to encourage persons to
supply their labour.

5.4 Natural Rate of Unemployment

This section lays emphasis on the natural rate of unemployment. This is a term related with new
Classical and monetarist economists. It is defined as the rate of unemployment that still exists
when the labour market is in evenness, and contains seasonal, frictional and voluntary
unemployment. The US economist Milton Friedman first used the idea to help explain the
assembly between unemployment and increase. Friedman argued that if unemployment
demolish below the natural rate there would be a growth in the rate of inflation.
Over the past 30 years, employment in the service sector has improved to over 70% of total
employment, while employment in manufacturing has reduced to 20%. Since the 1940s
employment in the primary sector, comprising agriculture, has been less that 3% of the workforce.

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