NYJC_H2_ECON_ESSAY_QN4

4. “Singapore's unemployment rate rose to 2.1 pe r cent in June from 1.9 per cent in March 2011. The Ministry of Manpower (MOM) said 1,500 workers were retrenched and 400 had their contracts terminated prematurely, resulting in a total of 1,900 workers being made redundant in the second quarter of 2011. Adapted from www.todayonline.com (a) Explain possible causes of unemployment in Singapore. [10] (b) Assess the view that the Singapore government should focus on achieving low unemployment as its main macroeconomic goal. [15] Suggested Answer (a) Explain possible causes of unemployment in Singapore. [10] Synopsis Answer requires students to discuss the causes of unemployment in Singapore. As the time period is not stated, students may discuss the types of unemployment that Singapore faced both past and present. The types of Unemployment should include cyclical, structural and frictional. For each type, there is a need to explain what it is and reasons why it occured! 1. Intro In recent years, Singapore has been experiencing three main types of unemployment namely frictional, cyclical and structural unemployment 2. Types of Unemployment Explain the types of unemployment and reasons they occurred. a. Frictional Unemployment Frictional unemployment is transitional unemployment due to people moving between jobs: For example, newly redundant workers or workers entering the labour market (such as university graduates) may take time to find appropriate jobs at wage rates they are prepared to accept. Many are unemployed for a short time whilst involved in job search. Imperfect information in the labour market may make frictional unemployment worse if the jobless are unaware of the available employment opportunities. This type of unemployment is common in all countries inclusive of Singapore. b. Cyclical Unemployment Cyclical unemployment is involuntary unemployment due to a lack of aggregate demand for goods and services. This is also known as Keynesian "demand deficient" unemployment and is associated with the transition of the economy through the business cycle. When there is an economic recession we expect to see a rising level of unemployment because of plant closures and worker lay-offs. This is due to a fall in demand leading to a contraction in output across many industries. Sources of Cyclical Unemployment i. Recession of Trading partner Singapore is a small and open economy and hi ghly dependent on trade – trade(X+M) is almost 4 times of GDP. Singapore is affected significantly by external demand especially in the US, rather then by domestic demand as the domestic market is small. Singapore being trade dependent saw rising cyclical unemployment during the global economic crisis of 2008 as well as during 2001 where its major trading partner USA

faced terrorism attacks. This reduced trade with Singapore due to the contraction of the US economy. With a fall in