RISES FOR SECOND MONTH
The economy of Japan is known worldwide for being one of the most fast growing along with other countries in Asia. Also Japan’s unemployment rates had grown unexpectedly and this will have a lot of consequences that will affect the country.
The unemployment rate has decreased from 3.6 percent to 4 percent in just two months,this means that the economy is operating below the level of full employment. When an economy operates at a level like this, it means that the rates of unemployment are increasing, in other words, that there are more people out of the workforce that want and can work but they just don’t find a job. This will make the supply for jobs to increase while the demand remains the same, so wages willincrease too.
To low the levels of unemployment is one of the main macroeconomic goals. So if the unemployment increases, there will be economic and social costs. An economic cost would be that consumption and investment in Japan will decrease, this will affect the people’s income and prices too. A social cost in the long run would be that services like education and security could beaffected and decrease which would lead to an increase in crime.
The unexpected rise on unemployment has concerned the Central Bank, and the government in Japan. The improvement in the labor market has weakened during the last months. A reason for this unexpected rise in unemployment could be technological advances, machines are replacing men on jobs; but this cannot continue for long since itwill cause the GDP per capita to decrease.
Another reason for unemployment to grow could be because of the small companies with fewer than 30 employees. These small companies are being affected by larger ones because their prices are higher and sometimes their costs could be higher too. Large companies are leaving smaller ones out of the market because they want to eliminate theircompetition, but since there are a lot of these small companies being left out, that unemployment is being generated. In other words larger companies are stealing and controlling Japan’s entire market, and also larger companies are more likely to have big, high technology machines that replace the work of 10 men.
The types of unemployment that are being generated in Japan are structuralunemployment and cyclical unemployment. Structural unemployment because since Japan has a lot of technological advances, workers are being replaced by machines, therefore unemployment is created, this type of unemployment is part of the Natural Index Rate of Unemployment (NAIRU). Cyclical unemployment because the demand for labor is derived from demand of goods and services, and with a downward stickinesson wages therefore wages will not adjust and decrease in the long run. Also this type of unemployment is linked to phases in the business cycle, and Japan is located below the level of full employment. This kind of unemployment in some way might explain why there are less and less small companies through time in Japan. For example, a really big company selling the same product as a small company.The big company will sell the same product cheaper since they can produce a lot of it at a lower cost and they take less time, but the small company cannot afford to do that since they have higher costs because they don’t have the same amount of equipment, technology or labour, this higher costs make the smaller companies sell their product at a higher price so they have less revenue and are notable to have the same wages as big companies, and eventually closing up, creating unemployment.
Japan also has frictional and seasonal unemployment but these types of unemployment exist in every economy. There are many solutions to Japan’s unemployment growth, but in Japan’s case probably some of the best would be more labor flexibility, but this is also a problem in Japan, also retraining...