(a) Citing practical examples, explain the differences between the following types of unemployment listed below and how each affects economic growth. (i) Seasonal and casual unemployment. ...

(a) Citing practical examples, explain the differences between the following types of unemployment listed below and how each affects economic growth.

(i) Seasonal and casual unemployment.
(ii) Disguised and unproductive unemployment.

(b) Outline policies which if implemented would alleviate the problem of unemployment.

Answers

(a) (i) Seasonal unemployment is caused by annual variations of seasons. This
implies that at any given time of the year there are likely to be workers who are laid off because of a seasonal fall in the demand for the services they offer. This type of unemployment is common in sectors such as agriculture and tourism which are characterized by seasonal variations. This type of unemployment leads to fluctuations in economic growth with growth being higher during the peak seasons.

Casual unemployment arises because workers are employed for a specific job and when the job is completed, such workers become eventually unemployed, for example, construction workers. The effect of casual unemployment on economic growth is that economic growth is lower during times of high casual unemployment.

(ii) Disguised or hidden unemployment arises where individuals normally
have jobs for which they are paid but they could be withdrawn without reducing output. This could arise because their efforts actually contributed nothing to output (in which case their marginal product is zero) or since others already engaged in a particular authority would increase their own productivity if some workers migrated to other sectors of the economy. Disguised unemployment is common in developing countries especially in the civil service and in the agricultural sector in rural areas. Labour which is in disguised unemployment contributes nothing to national product and economic growth.

Unproductive or open unemployment arises when a person is willing to work at the prevailing wage rate but is not able to secure a job. This type of unemployment is especially common in the urban modern sector in many developing countries. Thus, for example, the employment opportunities in urban areas may be insufficient to absorb all the people settled in urban areas. Unproductive unemployment represents a waste of productive resources and economic growth is lower when there is unproductive employment than it would have been the case had the labour been productively employed.

(b) The following policies if implemented could alleviate the problem of unemployment:

(i) Employment creation depends on the ability of countries to achieve sustained economic growth. Thus, internal constraints to economic growth which are to some extent within the control of the government should be addressed. For example, if the government provides an enabling macroeconomic environment foreign investment will be encouraged which in turn will contribute to employment creation.
(ii) Considerable emphasis for employment creation should be placed on the informal sector given that the possibilities for employment creation in the formal sector are limited in many developing countries. The availability of cheap finance is fundamental factor in this context.

(iii) Government policies should aim at removing factor price distortions such that as the price of labour relative to capital falls, labor-intensive production technologies are encouraged.

(iv) In order to deal with seasonal unemployment a diversification of economic activities
especially during seasons of low demand can be introduced.

(v) Intensive rural development can help to curb urban unemployment which arises from high levels of rural-urban migration. This development can, for example, take the form of improving social amenities with a view to making rural areas more attractive.

(vi) Governments in developing countries should not simply focus on job creation but also an enhanced productivity of workers in order to address the problem of disguised unemployment. Increasing the quantity and quality of co-operating factors of production such as land and machinery is vital in this regard.

Musyoxx answered the question on March 16, 2018 at 18:00

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(a) Citing practical examples, explain the differences between the following types of unemployment listed below and how each affects economic growth. (i) Seasonal and casual unemployment. ...

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