Question

State whether the given statements are True or False:(I) Changes in the age composition of the labor force will affect the natural rate of unemployment (for example, an increase in the relative number of youthful workers). (II) Institutional changes such as an increase in the minimum wage may increase cyclical unemployment but will not affect the natural rate of unemployment.

Answer 1

Answer:

Both are true statements

Explanation:

1st Statement: Changes in the age composition of the labor force will affect the natural rate of unemployment, Yes i agree with this and the example given is a typical scenario for this, Most employers always have age limit or set age barrier when recruiting e.g The clause of must not be more than 26yrs of age, what if the number of youthful workers which applies for these kind of jobs are more than 26 years, it just automatically increases the rate of unemployment, most companies dont want to employ 30+ years of age, such age requirement are always rear and it will be tied to an experience that is needed. so the above statement is true.

2nd statement: An increase in minimum wage can also affect cyclical unemployment, As most companies might not be able afford to make such increase which will can definitely increase cyclical unemployment. So this is tied to the income and affordability of some organizations, so organizations might even sack some to afford the increase in minimum wage , with this, the rate of unemployment has increased, So yes i agree that this statement is true.