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Unemployment and Full Employment

Illustration 50

Lets us consider the values for the year 2010 of an imaginary nation. In that particular year, 278.6 million populations were given employment and 16.2 millions were redundant. The Adult Population was 446.8 millions.

Compute the following:

1. Labour Force
2. Unemployment rate and
3. Labour Force Participation Rate

Solution

Labour Force                                       =          Total of employed and redundant

Hence,
Labour Force               =          278.6 + 16.2

=          294.8 millions

Unemployment Rate                           =          Number of Unemployed         x          100
Labour Force

Number of Unemployed                     =          16.2 millions

Labour Force                                       =          294.8 millions

=          16.2    x 100
294.8

=          5.49 %

Labour Force Participation Rate         =            Number Force           x          100

And Number Force                             =          294.8 millions

Hence,

Labour Force Participation Rate         =            294.8             x          100
446.8

=          65.98 %

Hence, in the year 2010, 2/3rd of the nation’s adult population were taking part in the labour market and 5.49 % of those labour market participants were redundant.

Types of Redundancy

Below are the grounds or kinds of Redundancy.

1. Frictional Redundancy

Frictional redundancy subsists when there is lack of tuning amidst demand for and supply of worker. This may be due to insufficient knowledge on the part of employers about the availability of labourers or on the part of labourers that employment is accessible at a specified place.

It is also occurred by lack of requisite technical know-how for a specified job, worker immobility, breakdowns of machinery, deficiency of inputs etc. The time of redundancy amidst laying off one job and getting another is also included under frictional redundancy.

1. Seasonal Redundancy

Seasonal redundancy consequents, from seasonal fluctuations in demand. Redundancy in ice industries is only for the summer season. Likewise, ice cream traders remain redundant during winter season and chestnut traders during summer season. The same is the case with farming labourers who remain employed during reaping crops and planting seeds seasons and remain inactive for the remaining year.

1. Cyclical Redundancy

Cyclical redundancy arises due to cyclical fluctuations in the financial system. They may also be produced by overseas influences. A trade cycle comprises of alternating phases of booms and depressions. It is during the downswing of the trade cycle that earnings and productivity drop leading to widespread redundancy.

1. Structural Redundancy

Structural redundancy results from a variety of grounds. It may be due to lack of the co-operant aspects of production or changes in fiscal structure of the society. The word structural implies that “the economic variations are massive, extensive, deep-seated, tending to shifting of a fiscal arrangement, i.e. the manufacturing functions or labour supply distribution. It refers to variations which are huge in the specific region, industry or occupation.”

1. Technological Redundancy

Keynes was unsuccessful to consider technological redundancy that has taken place more rapidly in the post-war era. Recent manufacturing procedure is necessarily dynamic where creativity tends to the adoption of new machineries and discoveries thereby dislodging the active labourers leaving behind a trail of redundancy. When there is automation or dislodging of ancient technology by a recent one necessitating fewer labourers than earlier, there is technological redundancy.

In factual, there is a small disparity amidst structural and technology unemployment. One of the grounds of structural redundancy is technological variation. Technological variation itself causes out of fashion of technical know-how thereby tending to structural redundancy.

Also, both structural and technological redundancies are associated to insufficient demand. Technological changes leads to enhancing productivity per man hour which has the effect of raising the potential total productivity in the fiscal system.

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