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(a) Explain the likely types of unemployment in Singapore that could challenge sustainable growth. [10]


(a) Explain the likely types of unemployment in Singapore that could challenge sustainable growth. [10]

Introduction

What is unemployment? Unemployment is the situation when people willing and able to work are unable to find employment, with the most common types being structural unemployment, demand-deficient unemployment, frictional unemployment, and seasonal unemployment. This essay explains the likely types of unemployment in Singapore that could challenge sustainable economic growth. Unemployment in Singapore that could affect sustainable growth is likely to be brought about by the following major factors: changes in the underlying structure of the economy and cyclical factors.

Body of Essay

The first likely form of unemployment in Singapore that could challenge sustainable growth would be structural unemployment. Structural unemployment occurs when there is a mismatch of skills and knowledge. For instance, structural unemployment occurs when workers in sunset industries, with declining demand for their products, are unable to be reemployed in new, growth industries, with increasing demand for those new and probably high-tech products, due to a mismatch of skills, talents, and training for the new changed production structures. Also, for example, in Singapore in the 1980s, there was a shift from low-end production to higher-end production and this shift required workers to have the required higher level skills. As a result of the mismatch of skills required of workers to work in the new high-end production industries, structural unemployment occurred. Singapore often faces structural changes due to the dynamic changing needs of her economy, and the extent of structural unemployment depends on the adaptability of workers to adapt to these new needs.

The second form of unemployment that could challenge Singapore’s sustainable growth would be cyclical unemployment, also known as demand-deficient unemployment. This unemployment is linked to the business cycle, where downturns occur now and then, aggregate demand (AD) falls, causing unemployment, and a fall in actual economic growth. Actual economic growth can be thought of as an increase in real national income in a given period of time. In particular, due to the small size and relative openness of the Singapore economy, dependence on trade makes Singapore vulnerable to cyclical unemployment, economic recessions, and falling AD. This leads to unemployment because there would be a fall in the general price level, profit expectations would also fall, and producers would cut down on employment, resulting in more unemployed workers with fewer job vacancies available.

Falling AD of the Singapore Economy

The sustainable growth of the Singapore economy can be defined as a sustained increase in the real national output or real national income (real Y) over a period of time. Structural and demand-deficient unemployment affect the sustainable growth of the Singapore economy as they affect the sustained increase in Singapore’s national income. During periods of low economic activity and high unemployment, there will be a fall in the consumption (C), investment (I), and net exports (X-M) of an economy, shifting AD to the left. The fall in C is a result of the fall in the disposable income of the workers as a result of being unemployed. The fall in C, I and (X –M) would lead to a fall in the AD. Assuming that the Aggregate Supply (AS) curve is unchanged, the fall in AD would translate into a fall in real Y over the period. This fall in real Y over a period of time would challenge Singapore’s sustained growth.

Conclusions

In conclusion, structural and demand-deficient unemployment are the two main forms of unemployment which potentially challenge the sustainable growth of the Singapore economy, lowering the national income of the economy. There are also other forms of unemployment such as frictional unemployment or seasonal unemployment that would also occur in Singapore. However, such forms of unemployment would not affect the sustainable growth of the Singapore economy; as such both structural and demand-deficient unemployment are by far the biggest enemies to growth.


JC Economics Essays: Tutor's Comments - Special thanks to TJL for his kind contribution. TJL is a friend (fellow teacher) of mine I knew from National Institute of Education (NIE) days, and who later went on to become an excellent, outstanding Economics tutor at IJ after completing his PGDE. This Economics essay was written under examination conditions. In the earlier, past few posts, here on JC Economics Essays, I have given detailed comments about what was right, good, and great about the essays and gave my view, comments, and ideas. It's time for me to revert back to the older Socratic questioning style of earlier posts here on my site! TEACHER'S QUESTION: putting yourself into the shoes of an Economics tutor, and ignoring the provenance of this sample/ model /version of the answer given by a tutor - what grade would you give this Economics paper, and why? what are the good things that you can learn from this Economics paper, and what are bad things that you should not learn from this paper? also, how would you improve on this Economics paper? how else could you approach it? Do remember to ask questions, and read with a critical, yet open, constructive mind. Thanks for reading and cheers!

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