Reduction of unemplyment benefits would increase rate of job finding and thus reduce unemployment.Is this True
Do I have to consider the fact that the overall number of jobs wouldnt increase?Will the unemployemnt rate actually decrease considering the labour market?
Answer:
No, it would mean people that were collecting would be poorer.
It's not true as you need to look at the demand side as well : if you're looking for job but no one wants to hire you, you're still unemployed. And it's very likely considering the remark of Alan Greenspan confirmed by the panic of Wall Street.
No, businesses aren't going to hire more workers because unemployed people are worse off. They will only hire more workers if the business' marginal costs will reduce with more labor. If you really want to reduce structural unemployment, reduce the minimum wage (which has it's own costs, and I don't recommend; I'm just saying that's the way to do it).
In general, this is true. Reducing benefits will increase the incentives to find work, reducing the time spent unemployed. Assuming that the separation rate of employees stays the same, this will lower the natural rate of unemployment.
The overall number of jobs will likely increase, since the supply of workers will essentially increase. However, the increase in employment should lower the real wage of workers, assuming that there are diminishing returns to labor in the economy. That is, more workers means that average productivity is lower.
Lot of ifs, but generally this should be true... frictional unemployment would decrease which would lower overall unemployment.
The number of jobs overall in the short run would not increase (sticky wages) but in the long run may be an increase in jobs as increased supply pushes wages down.
If the number of jobs stayed the same, then you would most likely get more discouraged workers who would fall off the roll of the unemployed and unemployment rates would still fall.
Peace
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Answer:
No, it would mean people that were collecting would be poorer.
It's not true as you need to look at the demand side as well : if you're looking for job but no one wants to hire you, you're still unemployed. And it's very likely considering the remark of Alan Greenspan confirmed by the panic of Wall Street.
No, businesses aren't going to hire more workers because unemployed people are worse off. They will only hire more workers if the business' marginal costs will reduce with more labor. If you really want to reduce structural unemployment, reduce the minimum wage (which has it's own costs, and I don't recommend; I'm just saying that's the way to do it).
In general, this is true. Reducing benefits will increase the incentives to find work, reducing the time spent unemployed. Assuming that the separation rate of employees stays the same, this will lower the natural rate of unemployment.
The overall number of jobs will likely increase, since the supply of workers will essentially increase. However, the increase in employment should lower the real wage of workers, assuming that there are diminishing returns to labor in the economy. That is, more workers means that average productivity is lower.
Lot of ifs, but generally this should be true... frictional unemployment would decrease which would lower overall unemployment.
The number of jobs overall in the short run would not increase (sticky wages) but in the long run may be an increase in jobs as increased supply pushes wages down.
If the number of jobs stayed the same, then you would most likely get more discouraged workers who would fall off the roll of the unemployed and unemployment rates would still fall.
Peace
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