Taxation

Taxes are money being placed on goods, services and income by the government.

Indirect tax a sort of tax being placed on goods and services by the government in order to reduce or increase on the price.

If you want to reduce the high price for a certain good, you put taxes on the firm for each good it produces.

For example, eggs may rise to $99 due to the high demand and how inelastic it is, the government then set an indirect tax on the company for each egg it produces, in order to decrease the price.

However, if you want to increase on the goods or services in order to decrease the demand, you insert indirect taxes in that good in order to decrease social benefits.

Such as smoking for instance, the government can introduce taxes on cigarette per pack in order to decrease the willingness of people wanting to buy it, to decrease second hand smoke polluting people’s lungs; and that, is a solution to market failure.

Hello, welcome to my blog about unemployment. As you can see from the cartoon above, unemployment is a BIG problem in the world today, which could be caused by many different factors.

So the first question we need to tackle is:

What are the different types of unemployment?

YES there are different types of unemployment. The four main ones are:

Frictional Unemployment:

What is it? This is when workers move from one job to another and collect benefits in the meantime. This type of unemployment is ALWAYS present in an economy and it is also the least serious since it is a type of short-term unemployment. When you graduate from school and are looking for your first job, you will also be classified as someone who is unemployed - this is also included in frictional unemployment.

Seasonal Unemployment:

This type of unemployment is very straight forward and self-explanatory. This is when a number of people are not able to find jobs during a particular season. e.g. ski instructors or life guards. Another example is agriculture which only has increased demand for labour during the seasons of harvesting, sowing and threshing.

Structural Unemployment:

Structural Unemployment occurs when the demand of jobs in a particular industry declines. This causes many people to become suddenly unemployed because they are unable to learn the skills necessary for jobs being created in new industries. This is one of the more serious types of unemployment, because the government now has to deal with large numbers of unemployed people with no skills to get new jobs.

Cyclical Unemployment:

This kind of unemployment occurs when there is a lack of aggregate demand for goods and services. Just think of it like this: you're grounded and your parents have made your allowance smaller! Now you cannot buy as much as you could before so you have to give up some items! (a.k.a OPPORTUNITY COST but thats a different topic altogether!) So let's say you gave up buying the stick of gum you always buy, then the gum manufacturer will have less demand for its product. However, this usually happens on a huge scale, such as when there is an economic recession, therefore the gum manufacturer will have a hugely decreased amount of demand and will reduce the amount of gum they make so they don't have a surplus. Therefore, more people are laid off as a result of this.

What causes unemployment?

There are many causes of unemployment in addition to the ones mentioned above, such as:

Inflation - a rise in the general level of prices of goods and services in an economy over a period of time.

Disability - the condition of being unable to perform as a consequence of physical or mental unfitness.

Rapid changes in technology - technology replaces human labor.

Recessions - a widespread decline in the GDP, employment and trade lasting from six months to a year.

Changes in tastes

Willingness to work

Discrimination in the workplace

What are the consequences of unemployment?

Loss of income - this leads to a decline in spending and a lower standard of living.

Loss of national output - this causes the GDP to decrease.

Fiscal costs - the government will receive less tax revenue which leaves them with less money to spend on merit and public goods for society. On top of that, they will have to pay money to unemployed people in the form of benefits, which could cause the government to have a budget deficit.

Social costs - an increase in unemployment could create an increase in crime and theft. This could also lead to lower life expectancy and worsening health for unemployed people.

How to decrease unemployment?

Better education - higher literacy rates, more skilled workers.

More output and economic growth - higher demand for workers.

Incentives - for people to search for and accept paid work.

Tax reform - changing the way the government collects and manages tax.

Here is a link to a video: http://www.cbsnews.com/video/watch/?id=6178887n which shows how the level of unemployment in the current recession is actually declining.