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(a) Explain the main types of unemployment in Singapore. [10]


Singapore’s unemployment rate could surge to a 20-year high of 5 percent next year. This would be the highest level of unemployment since 1986.

Adapted from The Straits Times, February 2009 (adapted from an examination question)

(a) Explain the main types of unemployment in Singapore. [10]

Unemployment is commonly defined as the situation in which people who are willing and able to work are unable to find work at the prevailing wage rate, and there are a few main types of unemployment such as cyclical (sometimes called demand-deficient unemployment), structural, seasonal, and frictional unemployment. In Singapore, the three most common and main types are cyclical, structural, and frictional unemployment, given Singapore's context. This paper explains these three main types of unemployment. 

Cyclical Unemployment

Demand-deficient unemployment or cyclical unemployment is a major cause of unemployment in Singapore because Singapore has a large external sector and is largely dependent on external demand for economic growth. For instance, in the contract manufacturing of electronics, Singapore exports heavily to the rest of the world. If international demand for Singapore’s electronics exports falls, then firms producing those goods will face a lower demand. Hence, firms that face decreased demand for their goods and services might reduce the cost of production by reducing their output and employment.  Another way of looking at this same issue is - since Singapore is a small and open economy, heavily dependent upon exports, when exports fall, Singapore's AD will fall, and shift to the left, thus lowering national output and income, while increasing demand-deficient unemployment. 

Structural Unemployment

As a result of globalisation, there is a lot of restructuring in Singapore and in the process structural unemployment might result in Singapore. First, Singapore has changed from a labour intensive to capital intensive economy, and thus different skills are required. Workers who do not have the appropriate training and expertise to move into a different industry are laid off, thus contributing to unemployment. For instance, Singapore has recently moved into the biomedical and R&D (Research and Development) industries and thus workers who can only work in the lower end manufacturing industries might find themselves unemployed since mass production work can be outsourced to India and China.

Frictional Unemployment

Frictional unemployment happens because it takes time for people to find new jobs when they change jobs or look for suitable jobs. Job creation and destruction creates the need for people to look for jobs and for firms to look for employees, and as such there is a time lag. Also students who have finished studying and are looking for a job also tend to be frictionally unemployed.

Conclusions

In conclusion, on balance, the dominant cause of unemployment in Singapore is likely to be cyclical unemployment because the economy is dependent heavily on external markets and thus the effects of global recession would impact unemployment in Singapore heavily. With a global recession (especially during 2008-2010), a fall in global income results leading to lower purchasing power, with a fall in consumption and net exports assuming that demand for exports and important are both price elastic. The concomitant poor business sentiment would result in falling investment, and AD would fall further. Fewer goods and services are demanded and as a result firms would then retrench workers thus causing cyclical unemployment.


JC Economics Essays - Tutor's Commentary: This H2 Economics essay on Singapore's unemployment is very well written and addresses the economics question pertinently, and would get rather high marks. It is clearly written, direct, and answers the question posed. Always remember to answer what the question is asking for, and not what you imagine the question to be asking you. This tip can prove very valuable in examinations. Ask yourself a few questions: how can this economics essay be improved, and made even better? What would I have done differently or similarly? Thanks for reading, and cheers!

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