rue, involuntary unemployment can exist is if something gets in the way of market forces. The presence of a legal minimum wage is commonly pointed to as one such factor. As illustrated in Figure 2, if employers are required to pay a minimum wage of W* (“W-star”) that is above the equilibrium wage, this model predicts that they will hire fewer workers (htt3). At an artificially high wage W*, employers want to hire only LD workers. But at that wage, LS people want jobs (htt3). There is a situation of surplus (htt3). The market is, in this case, prevented from adjusting to equilibrium by legal restrictions on employers. Now there are people who want a job at the going wage, but can’t find one. That is, they are unemployed (htt3).
The minimum wage only affects a portion of the workforce, however—people who are relatively unskilled, including many teenagers. But unemployment tends to affect people at all wage levels (htt3). Classical economists suggest other “market interference” reasons for unemployment, as well (htt3). The economy might provide less than the optimal number of jobs, they believe, because:
regulations on businesses reduce their growth, restricting growth in the demand for labor
labor-related regulations (such as safety regulations, mandated benefits, or restrictions on layoffs and firings) and labor union activities increase the cost of labor to businesses, causing them to turn towards labor-saving technologies and thus reducing job growth
public “safety net” policies such as disability insurance and unemployment insurance reduces employment by causing people to become less willing to seek work (htt3)(Cleveland, 2006)
The Keynesian theory of unemployment is that an increase in unemployment reduces income, which reduces consumption, and reduces aggregate output (keynesian, 2010). Individuals base decisions on current income receipts (keynesian, 2010). Unemployment benefits thus serve to compensate the job loser from the fall in income. In the Keynesian theory, unemployment could be reduced if money wages were to decline (keynesian, 2010). However, money wages are fixed by institutional datum (keynesian, 2010). Unemployment compensation is necessary to prevent further reductions in real output because consumption is based on current income receipts (keynesian, 2010). Keynesian theory implies that increases in unemployment compensation have a simulative effect on the economy (keynesian, 2010) (Hendrickson, 2010)
Recommend economic concepts or interventions that could be employed to correct unemployment
Unemployment cannot be terminated, but it can be reduced first by reforming our education system to the extent that in our education system to the extent that in addition to academics, hands- on skills become compulsory for all students. An improvement in the employability of the labour supply - so that the unemployed have the right skills to take up the available job opportunities. Policies should focus on improving the occupational mobility of labour (tutor2u, n.d.). Improving skills and reducing occupational immobility Policies should provide the unemployed with the skills they need to find re-employment and improve the incentives to find work (tutor2u, n.d.). Structural unemployment is the result of workers being occupationally immobile - improvements in education and training will increase the human capital of these workers, and therefore give them a better chance of taking the new jobs that become available in the economy An improvement in the incentives for people to search and then accept paid work - this may require some reforms of the tax and benefits system (tutor2u, n.d.) (limited). (limited) Economic dualism should also be dealt with, economic dualism is a situation in which one sector of the economy, for example, telecommunications is more advanced, while another, say agriculture remains undeveloped. It is imperative that the government and the rich start extensive farming in Jamaica and of course this can create employment opportunities for many youth. Lower interest rates so that many Jamaicans can