Question

“Tougher product market co mpetition will reduce structural unemployment.” Explain this statement. Discuss what the government could do in practice to promote fier cer product market competition.

Answer 1

Structural unemployment occurs due to mismatch between the skills i.e the skill an labourer posseses and the skill that a job demands.

Tougher product market competition means tougher competition among the firms in economy. The competition can be in tems of product quality, product durability , price charged etc. Higher competition means each firm will try to outdo its rival by lowering its cost of production . Cost of production can be reduced if firms hire the labour even if there is some skill mismatch. Thus incresesed hiring will increase employment and thus reduce the structural unemployment in economy.

options with goverment

* Govt. can make laws which promotes competition . These laws should look into cases where firms are trying to form cartels to earn profits.

* Govt. must increse the minimum wages in economy.