Analyse the causes of unemployment in Singapore in recent years.

Chapter: Unemployment

Identify the possible causes of unemployment, such as structural unemployment, frictional unemployment and demand-deficient unemployment. It will be important to examine the possible determining factors to explain why specific types of unemployment are more likely to be observed in the Singapore economy.

   07 August 2018

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Unemployment refers to an economic condition whereby individuals are willing and able to work but are unable to secure a job. In the recent years, unemployment is relatively high in Singapore due to the systematic changes in the global environment and the internal economic restructuring. In this essay, we will examine several causes of unemployment.
One factor is economic shocks. Economic shocks refer to systemic factors such as Asian Currency crisis, September 11 and SARS will affect the economy extensively, contributing to falling demand for our products and disruption of production and distribution structure. These incidents will prompt local and foreign enterprises to adjust their ‘organization structures’ leading to the retrenchment.

Second, there is demand-deficient unemployment. Demand deficient unemployment will arise as falling export demand will affect most of the export-oriented industries. The fall in demand is the result of the fall in export demand which is caused by regional or global economic downturns. This will lead to a fall in the production which means less labour is needed, contributing to excess labour supply condition. Since wage rate is sticky downward, unemployment will occur under the condition where the labour market is unable to attain market equilibrium which is the feature of disequilibrium unemployment due to demand deficient As Singapore is highly dependent on external market for growth, the impact has considerable consequences on the employment rate.

The fall in demand will lead to the enterprises to make adjustment to increase their competitive edge, giving rise to outsourcing and cost-cutting exercises which lead to retrenchment. These cost saving measures to raise the firm's’ competitiveness are making it tougher for the older workers to sustain their employment. Though MOM tries to find new jobs for these laid-off workers, it may not be easy as the workers may not match the skills of the jobs demanded by the new industries.

The change in the economic structure gives rise to sunset and sunrise industries have also contributed to structural unemployment which is induced by sectoral adjustment. The workers are laid off from the sunset industries may not have the relevant skills to work in the new industries.

As the economy adjusts its production structure, it will mean the development of new investment which will lead to technological advancement. This will lead to technological unemployment as less workers are needed as the industries are more productive with more capital usage and skill incompatibility.

In conclusion, there are internal and external causes affecting unemployment. Given the detriments of unemployment, it is important for the government to introduce appropriate demand-side and supply-side policies to reduce unemployment in Singapore.