Dismissal costs are bound to increase unemployment?
“Dismissal costs are bound to increase unemployment”. Comment on this statement by
discussing the effects of a new regulation makes it more difficult for firms to dismiss their workers,
for example by imposing a firing tax for each worker dismissed. Explain the likely influence of this
policy change on the natural rate of unemployment and the rate of job vacancies. Hint: think of what
happens to the separation and job finding rates.
Answer:
1. The harder it is to sack workers, the more reluctant employers are to take them on. So job vacancies will be fewer.
2. Any tax increase on a business will reduce its competitiveness. There may be offsetting benefits, but the first effect of a tax is to encourage import substitution.
3. Any tax on employment will send a price signal that encourages businesses to substitute capital for labour. therefore increasing unemployment. This is the simplest true answer to your question.
flow , everything in economics depend on flow. What doesnt in our world? Energy does music does english does drawing now thats an interesting one?
Fashion yes.
Nearly everything depends on flow
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discussing the effects of a new regulation makes it more difficult for firms to dismiss their workers,
for example by imposing a firing tax for each worker dismissed. Explain the likely influence of this
policy change on the natural rate of unemployment and the rate of job vacancies. Hint: think of what
happens to the separation and job finding rates.
Answer:
1. The harder it is to sack workers, the more reluctant employers are to take them on. So job vacancies will be fewer.
2. Any tax increase on a business will reduce its competitiveness. There may be offsetting benefits, but the first effect of a tax is to encourage import substitution.
3. Any tax on employment will send a price signal that encourages businesses to substitute capital for labour. therefore increasing unemployment. This is the simplest true answer to your question.
flow , everything in economics depend on flow. What doesnt in our world? Energy does music does english does drawing now thats an interesting one?
Fashion yes.
Nearly everything depends on flow
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