Frictional unemployment occurs when people are seeking a change of job and are in the process of looking for another. This is the kind of unemployment where people are in between jobs. It is also something that re-entrants of the market. Brue, Flynn and McConnell (2009, p. 524) stated that is a kind of ‘wait unemployment’, where worker is only temporary loss of job, short term. This can be due to the nature of the job, remuneration, expectations, skills, and location amongst others. Employing processes, such as interview will take time to complete for both the employer and employee.
[TYC1]This results in the temporary loss of a job. And if the situation does not improve, it will cause productivity and efficiency problems to the organization, due to the lack of workers and/or low morale within its employees. However, there are also positive impact to the economy, as when workers are content with their jobs, they increase their productivity which can contribute to both the organization and GDP. (Brue, Flynn and McConnell, 2009).
This can be supported by Singapore’s Ministry of Manpower in 2006 and 2007, although the turnover or resignation rate for was maintained at 2%, GDP increased to 0.6% and average wage is up from 3,544 to 3,773. (MOM, 2009a, b). [TYC2]Base on the data, the resignation or turnover rate does not have negative impact on the country economy. Structural unemployment happens when there are more workers than positions available. This is a mismatch in the skills of the workers and the requirements for the job. In this case, there are either not enough workers equipped with the skills to perform the task, or there are not enough positions to meet the large number of people who qualify for the job.
Skills are the distinctive mark of structural unemployment. MOM (2000) highlighted that this poses a problem to Singapore due to fast pace of technological changes. Workers with lower level of education are likely to have problems meeting the skill requirements of the new jobs created. In 2008, 19. 6% (SDS, 2009a) of Singaporeans age 25-39 received secondary school education. This is a problem for the government as these workers might find themselves without jobs as they are not equipped with the necessary skills for the jobs that are available.
Hence, the rise of structural unemployment in the country. We shall elaborate of the remedies for structural unemployment shortly. To better grasp the economic theories of unemployment, we can look at real problems, such as the implications of unemployment in Singapore, and try to apply what we have learnt. Let us first, understand what exactly the newspaper article meant when they mention unemployment. Unemployment rate “gives the fraction of labour force participants who are unemployed. “1 Following the current trend, at the 2nd Quarter of 2009 we may have 12,400 unemployed workers.
Despite the large number, the recent MAS survey forecasted the total unemployment rate for this year to be 3. 8%, which is a decrease from the 4. 2% unemployment rate in June 2009. Comparatively, this would have a lesser impact compared to 5. 2% during the SARS crisis in 2003. One of the attributes causing an increase in the unemployment rate is the entry of 116,000 fresh graduates who are actively looking for a job. The unemployment rate in manufacturing industry was especially affected negatively with 17,600 job losses.
Workers such as the production, service and lower educated workers are more likely to have problems meeting the skill requirements of new jobs created, due to mismatch of skills. Hence, this type of unemployment is structural. This heavily impacts Singapore’s economy, as much as 20% of the GPD is depending on manufacturing in 2008 (SDS, 2008). The government has introduced a few preventive measures to reduce structural unemployment. Such as Skills Programme for Upgrading and Resilience (SPUR) which absorbs up to 100% of the training fee.
SPUR has helped to stave off retrenchments, given that many of the workers sent for training by employers come from badly-hit sectors such as manufacturing (Lin, T. Q. , 2009). SPUR has effectively also led to a decrease in the unemployment rate2 . This is greatly beneficial for lesser-educated and low-skilled workers to upgrade their skills, especially in the manufacturing sector where technology changes constantly and workers must be equipped with the necessary skills to keep up with the changes to remain employable. SPUR costs the government millions of dollars every year.
In 2009, government allocated $1. 05 billion towards training compared to previous year’s $825 million. This money could be channeled elsewhere, for example to the Ministry of Trade and Industry of Singapore whose budget was reduce from 2. 52 billion in 2008 to 3000 million in 2009. (MOF, 2009). Regardless of the exact nature of unemployment in society, the effects are detrimental to the economy. Full employment is on the four macroeconomic goals that most governments aim to achieve. 3Unemployment signals that there are people who are willing to work but are unable to find jobs.
This would lead to households decreasing their spending and thus the cyclical nature of unemployment. If left uncontrolled, this will result in waste of scarce economic resources and reduces the long run growth potential of the economy. Unemployed individuals become a burden to society as not only do they receive benefits but do not pay taxes which are one of the sources of government’s earnings. In the long term, the unemployed may abuse the system.
As such taking up part time jobs such as tuition teachers, whom do not contribute to GDP and enjoy tax relive from the government[TYC3]. Unemployment wastes the only resource which is people that Singapore has to rely on. Therefore, government takes a very serious view in unemployment, as it affects the economy and the society as a whole. [TYC4].
Alcaly, R. (2003), ‘The New Economy’, United State of America: Farrar, Straus and Giroux Brue, S. L. , Flynn, S. M. , McConnell, C. R. (2009), ‘Economics’, 18th edn, United State of America: McGraw Hill Irwin Borjas, G. (2009) ‘Labor Economics’ 5th edn, Singapore: McGraw Hill Education