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Report Macroeconomic Issue- Unemployment (ECO 211)

Business transportaion (Universiti Teknologi MARA)

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FACULTY OF BUSINESS AND MANAGEMENT

MACROECONOMICS

(ECO211)

WRITTEN REPORT:

MACROECONOMIC ISSUE: UNEMPLOYMENT

GROUP:

J4BA1173A

PREPARED FOR:

MADAM SITI MAHIRAH BINTI MOHAMED

PREPARED BY:

NAME STUDENT ID
CASUARINA NISHA ANAK AYU 2019244868
GENVEANA LAURA ANAK INSOL 2019264602
MUHAMMAD HIDIR BIN MOHD YUSOFF 2019209156
NURUL NAJIEHA BINTI RAMIZAN 2019251238
SITI AMINAH BINTI BAHARI 2019240068

SEMESTER: OKT 2020 - FEB 2021

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ACKNOWLEDGEMENT

First of all, we would like to thank each one of our group members because they had
gave 100% of their cooperation to finish this written report assignment. We finally managed
to finish this group assignment with a great determination.

Also, we would like to acknowledge our gratitude, to those who had guided us
throughout this assignment. Firstly, we would like to thank to our Fundamental of
Macroeconomics lecturer, Madam Siti Mahirah binti Mohamed. She has gave us good
guidelines throughout the process of carrying out this report. Without her guidance and
encouragement, this report would have not been possible to accomplish. Moreover, we
would like to thank to all of our friends who had helped and share their knowledge with us.
They also give us support and advices. Lastly, we want to thank to our beloved parents who
has been supporting us physically and emotionally and for their love, understanding, prayers
and encouragement in making this report.

We had put so much efforts and acknowledgement to search information and ideas
to complete this assignment. We hope it is done as followed as we had done our best.

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TABLE OF CONTENT

ACKNOWLEDGEMENT....................................................................................................................1
1.0 INTRODUCTION.....................................................................................................................3
2.0 ANALYZING CURRENT MACROECONOMICS PROBLEM...........................................5
2.1 Reduction productivity........................................................................................................5
2.2 Created negative supply stock..........................................................................................5
2.3 Manufacturing productive activity slowing down due the global supply chain
disruptions and closures of factories..........................................................................................6
2.4 Service industries such as tourism, hospitality, and transportation have
suffered significant losses due to reduction in travel.............................................................6
2.4.1 Transportation...................................................................................................................6
2.4.2 Tourism................................................................................................................................7
3.0 APPROPRIATE MEASURES TO OVERCOME THE MACROECONOMICS
PROBLEM...........................................................................................................................................8
4.0 CONCLUSION......................................................................................................................10
REFERENCES..................................................................................................................................11

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1.0 INTRODUCTION

Unemployment is a term that refers to people who are employable and those who
searching for a career but are unable to find a job. In comparison, that is the people in the
workforce or the pool of individuals that are eligible for jobs who do not have a suitable
employment. Unemployment is often used as a measure to gauge the health of the company
in a country. There are six types of unemployment which is classical, frictional, seasonal,
structural, technological and cyclical.

Firstly, type of unemployment is classical unemployment. It is also known as the real

wage unemployment. Classical unemployment happens as actual wages remain above the
market-clearing wage rate, due to excess labour supply. It arises when trade unions drive
wages in excess of the market clearing levels, resulting in a fall in demand for labour. Trade
unions usually negotiate to increase real wages causing classical unemployment. Classical
unemployment is also caused by government minimum wage [ CITATION Tej21 \l 1033 ].

Secondly, is frictional unemployment. Frictional employment is the product of

voluntary employment transitions within the economy. Frictional unemployment arises
normally, often in an increasing, prosperous economy. This occurs when people enter the
labour market to look for jobs or people leave their jobs, either voluntarily or are asked to go,
and are unemployed for a period of time while they are looking for a new job. Frictional
unemployment involves recent arrivals, such as school leavers, new graduates and re-
entrants, such as individuals who have left their jobs for a better career or higher pay or
retired home-makers [ CITATION Jul20 \l 1033 ].

Next, seasonal unemployment is one of the types of unemployment. Seasonal

unemployment refers to the span of time when demand for labour or labor is smaller than
usual under such circumstances, but this condition is only temporary and thereafter work
returns to normal. It results from fluctuations in weather condition, climatic changes or
changes in the trend of demand. For an example, there are a few extra jobs created around
Christmas and New Year's Eve, such as salesmen in a few department shops, Christmas
tree sales, decoration, Santa costumes, and more after which they will not have any work for
the rest of the year. They are recruited primarily for the purpose of dealing with extra
customer activity during the relevant season and will not be hired for a whole year, but rather
for the particular season [ CITATION Wha20 \l 1033 ].

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Other than that, is structural unemployment. Results from structural decline of

industries, unable to compete or adapt to changing demands and new products, or changing
method of production. Structural unemployment refers to the discrepancy between the
available jobs and the skill levels of the unemployed. It's caused by forces other than the
business cycle. It happens as the underlying change in the economy makes it difficult for
certain people to find jobs. It is more difficult to fix than other forms of unemployment.
Workers who are laid off or out of work even longer, will find difficulties in getting their job as
their job skills may no longer match [ CITATION KIM20 \l 1033 ].

Furthermore, the type of unemployment is technology unemployment. Technological

unemployment happens as technological changes and working methods lead certain
workers to lose their jobs. Arise from a labor-saving manufacturing process or advanced
technologies involving employees with a particular range of skills. People who have lost their
jobs will have to learn new skills and the government can assist by offering retraining or re-
training services [CITATION Tej211 \l 1033 ].

Last but not least for the type of unemployment is cyclical unemployment. It also
known as the demand deficient unemployment. Cyclical unemployment is the component of
overall unemployment that results directly from cycles of economic upturn and downturn.
Cyclical is caused by a lack of demand in the downswing of the business cycle or recession.
It exists because there is a recessionary gap forcing business to lay off large numbers of
workers to cut costs. Cyclical unemployment typically increases during recessions and
decreases during economic cycles and is a central concern of economic policy [ CITATION
STA20 \l 1033 ].

The unemployment rate in Malaysia and other countries is described as the number
of unemployed people as a percentage of the workforce. Labor comprises people who are
either working or unemployed, that is who do not have a job but are constantly searching for
one. Labor should not include people who are not looking for jobs, teenagers, and
pensioners [ CITATION Mal20 \l 1033 ].

There are data provide by The Global Economy that show Unemployment rate of
Malaysia [CITATION Mal201 \l 1033 ]. The data is as shown below:

 Malaysia unemployment rate for 2019: 3.32%, a 0.03% decline from 2018.

 Malaysia unemployment rate for 2018: 3.35%, a 0.06% decline from 2017.

 Malaysia unemployment rate for 2017: 3.41%, a 0.03% decline from 2016.

 Malaysia unemployment rate for 2016: 3.44%, a 0.34% increase from 2015.

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2.0 ANALYZING CURRENT MACROECONOMICS PROBLEM

As we all know that our country was infected by covid-19 early 2020. Not just our
country, but all over the world was infected. Day by day, reported cases are increasing. The
pandemic of Covid-19 severely affecting the global economy and financial markets. This
pandemic has caused direct impacts on reduction in productivity, created a negative supply
shock, manufacturing productive activity slowing down due the global supply chain
disruptions and closures of factories. Not only that, service industries such as tourism,
hospitality, and transportation have suffered significant losses due to reduction in travel
[ CITATION Pak20 \l 1033 ].

2.1 Reduction productivity

The global economy has been hampered by a series of shocks that undermined
productivity growth because of COVID-19. These shocks have compounded the erosion
caused by an undercurrent of weakening fundamental drivers of productivity growth. This
epidemic left lasting scars on labour productivity. COVID-19 are compound the erosion
caused by an undercurrent of weakening fundamental drivers of productivity growth. In
addition to the health crisis from COVID-19, the uncertainty about the duration of the
pandemic weighs on investment, as well as preventing trade; restrictions on foreign direct
investment and mobility could delay the reallocation of workers away from low-productivity
firms to higher-productivity ones [CITATION Ali20 \l 1033 ].

2.2 Created negative supply stock

In response to the COVID-19 outbreak, public health authorities around the world
implemented mitigation measures such as social distancing, which shut down entire sectors
of the economy, especially those that involve interpersonal contact, such as restaurants and
salons. While authorities have forced many such establishments to close, leaving many
workers jobless, and issued stay at home orders which is called as lockdowns, consumers
also decreased their use of these services. Furthermore, newly unemployed workers
reduced their consumption of all goods and services.

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For this reason, most economists would agree that the pandemic combines aspects of
supply and demand shocks. A supply shock is anything that reduces the economy's capacity
to produce goods and services, at certain prices. Lockdown measures preventing workers
from doing their jobs can be seen as a supply shock. A demand shock, on the other hand,
reduces the ability or willingness of consumers to purchase goods and services, at given
prices. People avoiding restaurants for fear of getting infected are an example of a demand
shock. Additionally, when service sector workers lose their jobs and income, they stop
buying all kinds of goods, such as cars and appliances, which can also be considered of as
a sectoral demand shock [CITATION Ist20 \n \l 1033 ].

2.3 Manufacturing productive activity slowing down due the global supply chain
disruptions and closures of factories
Manufacturing productive activity also slowing down due the global supply chain
disruptions and closures of factories. For example, in China, the production index in
February decreased by more than 54% from the previous month's value. In addition to the
impact on productive economic activities, consumers typically changed their spending
behavior, mainly due to decreased income and household finances, as well as the fear and
panic that accompany the epidemic [ CITATION Ant20 \l 1033 ].

2.4 Service industries such as tourism, hospitality, and transportation have

suffered significant losses due to reduction in travel.

2.4.1 Transportation
Airline industry players has highlighted that the current travel bans and
plummeting demand around the world have put the loss-making carrier at risk of bankruptcy.
As a result of travel reduction, the service industry has decided to reduce the number of
workers due to large losses and inability to pay the employee salary. For example, low-cost
airline companies like Air Asia Bhd and Air Asia X Bhd have confirmed the retrenchment of
10% of their 24,000 employees. This is because AirAsia might be planning a new round of
layoffs involving hundreds of its personnel for the continued survival in an industry severely
affected by the COVID-19 crisis [ CITATION Ber20 \l 1033 ].

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2.4.2 Tourism
The outbreak of COVID-19 has exposed a major risk to Visit Malaysia 2020
(VM2020) campaign as 50% of Malaysia’s tourists are originate from Singapore and China.
The increasing cases of COVID-19 in both countries has led to the cancellation of many
tours, which has already led to a large drop in the number of tourists to Malaysia. In order to
fully contain the virus, The Prime Minister of Malaysia announced the 4 phases of Movement
Control Order (MCO) as they expected the number of COVID-19 cases would continue to
increase. The prohibitions during the MCO will further contract Malaysia’s tourism industry
and therefore effective policies to assist the industry players are imperative [CITATION
The20 \l 1033 ]. Because of this Movement Control Order (MCO), tourism industry a huge
loss problem and had to lay off workers and this makes the unemployment rate rising.

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3.0 APPROPRIATE MEASURES TO OVERCOME THE MACROECONOMICS PROBLEM

Based on the unemployment issue, there are several measures to overcome these
macroeconomic problems. This is because the problem of unemployment is very important
for us to address so that we can produce individuals who are successful and have goals in
life. Therefore, some steps must be taken professionally so that the standard of living of a
society will be improved.

A lack of adequate instruction in software, technology, equipment, or other processes

would be the most apparent issue affecting low productivity. In other words, "hard abilities."
These are the types of abilities that are apparent when something goes wrong or isn't done
properly. With preparation, all kinds of hard skills can be quickly tackled. Because of its
shortened training period, usage of less tools, and better learning retention outcomes,
microlearning is a common tool of choice. An on-demand video format that covers the skills
needed for the needs of the particular employee will get them up to speed easily and more
effectively than ever. For management and subordinates, soft skills are highly important. In
the ability to lead and coach, which are the key outlets for inspiring workers who do not see
their worth in the business or fail to remain active among other stressors, they play a
significant role. Measuring soft skills can be more difficult than hard skills, but it is also
beneficial to offer instruction in these fields through a number of approaches, including
microlearning recordings, mentoring services, and 360 reviews [ CITATION Kri20 \l 1033 ].

Reduction of individual income tax rates and reduction or elimination of import duties
on certain goods including intermediate goods, which aims to reduce business operating
costs as well as production costs which can indirectly increase supply. In addition, lower
taxes will increase household disposable income and increase consumption. It also results in
increased after-tax profits and more money can be used to make investments. For example,
to encourage the manufacture of machinery and other equipment in Malaysia, the value-
added criteria for the purpose of granting pioneer status and investment allowance
investment has been reduced from 30% to 20% [ CITATION Pen02 \l 1033 ]. To strengthen
the contribution of the agricultural sector to economic growth, reinvestment by existing
companies is given an income tax exemption for five years. Hence, tax reduction can further
boost production activities which will increase employment demand.

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The government needs to reduce the dependence of resources on foreign countries

or factory activities to ensure production will not be disrupted. For example, many countries,
including Malaysia, stopped production after the current supply of essential goods COVID-
19, which is mostly produced from China as the largest producer. In addition, Malaysia also
needs to diversify the supply chain of imported goods to reduce the high dependence on one
source of import. So, the government spends money to develop development projects in the
production sector. this will Therefore, production activities will not be disrupted if there are
restrictions on goods from abroad and there is no unemployment [ CITATION DrZ20 \l
1033 ].

In overcoming the problem of significant losses due to reduction in travel, the central
bank needs to lower interest rates and be able to direct commercial banks to lower interest
rates on deposits. At the same time increase purchasing power and encourage people to
spend. For example. The Malaysian government also exempted tourism tax for the period
from 1 July 2020 to 30 June 2021 is one of the measures decided by the government to
reactivate the industry in the country. In addition, the government also exempts taxes on the
tourism industry such as travel agencies, hotel operators and airlines until the end of this
year. This will directly increase the demand and production of the sector, which will reduce
the unemployment rate [ CITATION Ast20 \l 1033 ]

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4.0 CONCLUSION

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AUTHOR, S. (31 August, 2020). Cyclical Unemployment. Retrieved from Investopedia:

https://www.investopedia.com/terms/c/cyclicalunemployment.asp

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Bernama. (09 October, 2020). AirAsia confirms laying off 10% of staff. Retrieved from The Edge Markets:
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Dieppe, A. (18 September, 2020). Slowdown in productivity growth compounded by COVID-19. Retrieved from
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Foo, L.-P. (12 Jun, 2020). The impact of COVID-19 on tourism industry in Malaysia. Retrieved from Taylor &
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Kagan, J. (29 November, 2020). Frictional Unemployment. Retrieved from Investopedia:

https://www.investopedia.com/terms/f/frictionalunemployment.asp

Malaysia Unemployment Rate 2016-2019. (2020). Retrieved from MacroTrends:

https://www.theglobaleconomy.com/Malaysia/unemployment_rate/

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Pak, A. A. (2020). Economic Consequences of the COVID-19 Outbreak: the Need for Epidemic Preparedness.
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Pettinger, T. (2021). Technological Unemployment. Retrieved from Economics Help:

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What is Seasonal Unemployment? (20 July, 2020). Retrieved from WallStreetMojo:

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terputus-rantaian-bekalan

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