Structural unemployment occurs a result of skills mismatch in the market. To solve this problem, long-run supply side policies are needed to increase the productive capacity of the economy.
Fig 1. shows how the usage of long-run SSP shifts the LRAS curve from LRAS (0) to LRAS (1). There is growth in the potential capacity of the economy. As a result, the full employment level of national income rises from Y(f0) to Y(f1). At the same time, AD also increases from AD(0) to AD(1) as long as long-run supply side policies usually involve government spending or increase investment. As a result, the economy experiences an increase in output from Y(0) to Y(1) with little impact on general price (in this case there is no impact and the non-inflationary economic growth is achieved).
In Singapore, the government fund upgrading courses which can help structurally unemployed persons pick up new skills in terms of language, IT, management and entrepreneurial. Some examples include courses provided by Community Clubs across Singapore as well as upgrading courses provided by the Continuing Education and Training Centres (CET) which is accredited by the Singapore Workforce Development Agency (WDA). With the newly acquired skills, workers would be able to increase their labour productivity and hence enable firms to lower their unit cost of production. This may be an added incentive for firms to retain workers during times of recession.
However, there are limitations to this long run SSP. The main concern lies with the attitude, aptitude and age of the workers who are sent for the courses. Without a good attitude towards learning, an aptitude and flair for learning new skills, and the ability to internalise the skill set learnt quickly, level of productivity may not have increased as desired and hence render the policy ineffective. Usually there is great resistance in acquiring new skills, especially among the older workers. Furthermore, workers who are lacking in basic education and literacy may find the acquisition of new skills to be extremely difficult. In the 2000 census, only about 20% of Singaporeans aged 55 and over at least Secondary education qualifications.
In Singapore, the government fund upgrading courses which can help structurally unemployed persons pick up new skills in terms of language, IT, management and entrepreneurial. Some examples include courses provided by Community Clubs across Singapore as well as upgrading courses provided by the Continuing Education and Training Centres (CET) which is accredited by the Singapore Workforce Development Agency (WDA). With the newly acquired skills, workers would be able to increase their labour productivity and hence enable firms to lower their unit cost of production. This may be an added incentive for firms to retain workers during times of recession.
However, there are limitations to this long run SSP. The main concern lies with the attitude, aptitude and age of the workers who are sent for the courses. Without a good attitude towards learning, an aptitude and flair for learning new skills, and the ability to internalise the skill set learnt quickly, level of productivity may not have increased as desired and hence render the policy ineffective. Usually there is great resistance in acquiring new skills, especially among the older workers. Furthermore, workers who are lacking in basic education and literacy may find the acquisition of new skills to be extremely difficult. In the 2000 census, only about 20% of Singaporeans aged 55 and over at least Secondary education qualifications.
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