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Unemployment Problem

Traditionally equilibrium unemployment includes both structural and frictional unemployment.

1. Some people believe that the solution to the "unemployment problem" is to shorten the work week. Do you believe this would work?

2. What role (if any) do you believe the American worker played in our current unemployment crisis? Why?

3. With a labor market that is willing to take a reduction in wages and becoming more willing to relocate, where do you see opportunities for those looking to become employed?

4. Are there hidden costs to unemployment?

5. Why might there be a "disincentive" to work for some people?

Solution Preview

Unemployment Problem
Traditionally equilibrium unemployment includes both structural and frictional unemployment.

1. Some people believe that the solution to the "unemployment problem" is to shorten the work week. Do you believe this would work?

Answer:
Shortening the work week would help reduce unemployment but it should not be viewed as a long term solution to solving unemployment problem. Shortening the work week would help reduce unemployment in the sense that employers would have to hire more people to cover the current standard work week of 5 days. For example, if employers shortened the work week to 3 days per employee, they would need to hire more people to cover the remaining 2 days of the standard 5 day work week. Therefore more people in the economy would be employed and the unemployment rate would go down. However, the long term way to reduce unemployment is to promoting education in order to encourage innovation. Innovation is one of the most important medicines to solving the unemployment problem. There is a direct relation between innovation ...

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