Problem

Structural unemployment

Nature:

In the realm of pure macroeconomics, and without the influences of public pressure, central banks and governments tolerate higher unemployment rates as a way of keeping inflation under control. A tacit understanding holds that unemployment in the 5 to 6% range helps keep control on both wages and prices, thereby deterring both workers and manufacturers from greedy behaviour. Such thinking has led to a retreat from full employment policies.

Incidence:

The 1990s began as a time of unemployment and slow growth, and low or falling output and high unemployment are likely to characterize the global industrial economy through the beginning of the decade at least. Many leaders appear to read their electorate as being more concerned about the dangers of renewed inflation than about unemployment levels, and the drag that joblessness places on recovery.

Claim:

The achievement and maintenance of full employment will require several conditions. First, the maintenance of sufficient aggregate overall demand for full employment is necessary. Government borrowing raises interest rates and crowds out private borrowing, decreasing job creation. Second, the absence of serious inflationary pressures at full employment. Third, any deficit on the overseas current account at full employment must be manageable and show no tendency to grow. The growth of imports and exports must be aligned. Fourth, new forms of work organization with worker participation in decision making have to be developed. Fifth, a successful productive economy capable of generating low levels of unemployment requires a financial sector that serves the needs of the productive sector, rather than the reverse.

Problem Type:
E: Emanations of other problems
Date of last update
21.12.2017 – 18:18 CET