Modern Labor Economics Theory and Public Method

Question: Discuss about the Modern Labor Economics for Theory and Public Method. Answer: Introduction Singapore has the highly urbanized trade oriented market economy. It has been ranked as the open economy because it has 7th ranked in the least corrupt country with minimum tax rate and third highest GDP per capita in the globe with respect to Purchasing Power Parity. The Singapore economy is a key foreign direct investment financier at the global level (Index of economic, 2016). This report analyzes the production output performance in Singapore economy and also describes the government measures to achieve the production output performance. It also evaluates the labor market in Singapore economy and defines the government policy to attain full employment. It also analyzes the price level in Singapore economy and exemplifies the government measures to achieve the stable price. Production Output Performance Analysis There are three different ways that are used by Singapore government to measure the GDP named output, expenditure and income approach. Further, income strategy measures income of people while output strategy is used to measures the worth of goods and services and also exploited to gain the income (Economic Caf, 2016). Further, the expenditure approach determines the expenses related to the goods and services. There are three performance indicators that used to measures the economy. It is discussed as below: GDP is important measures to evaluate the performance of Singapore economy over a given period. Further, GDP at the purchasing price is the sum amount of gross value added by every domestic manufacturer within Singapore economy. Further, it adds the tax of product and less the subsidies that do not involve in the products value (Singapore Government Securities, 2016). Moreover, GDP data is based on the current US dollar due to its official exchange rate. The real gross domestic product growth rate is determined by the yearly proportion growth rate of GDP at the market rate which is stand on stable domestic currency. Further, aggregately depends on the stable U.S. $ (Singapore MedTech portal, 2016). GDP per capita is referred to as the GDP that is separated by the population of midyear. It measures average income per person in Singapore country. Performance trend of Singapore economy From the above analysis, it is exhibited that real GDP of Singapore economy has declined from the US$3.6.344 Billion to US$292.739 Billion from 2014 to 2015. Along with this, it is analyzed that real GDP growth rate is declined from 6.0% to 2.0% from 2011 to 2015. Further, it is evaluated that GDP per capita has declined from US$56.124 to US$53.004 from 2014 to 2015 (Focus Economics, 2016). As a result, it can be said that there are several economic factors that affect the GDP of Singapore economies such as increasing interest rate, high unemployment rate, asset prices, wages, consumer confidence, infrastructure investment and high tax rate. Government measures adopted to achieve the production output performance There are different measures which are adopted by the Singapore government to achieve the production output performance includes lower interest rate, lower tax rate, declining exchange rate, and increase expenditure on infrastructure. It is evaluated that Singapore government tries to cut the interest rate in order to boost the aggregate demand. Because, the lower interest rate can decline the cost of borrowing, encouraging investment and spending of consumers in Singapore economy so it will help to increase the GDP of the country (Tan, et al., 2014). Moreover, Singapore government tries to cut down the tax rate and increasing their spending to boost the demand of consumers in Singapore economy. Since, a lower income tax increases the disposable income and increases the spending of the consumers (Rodan, 2016). Further, higher spending creates more jobs and offers the economic incentives. Additionally, Singapore government declines the exchange rate as it will be effective to make cheap the exports, mainly in electronics, chemicals, and services sector to make import expensive (Rodan, 2016). As a result, it will be beneficial to increase the GDP of the Singapore economy. From the above graph, it is illustrated that unemployment rate has declined from 2.0 % to 1.9% from 2011 to 2015 (Focus Economics, 2016). There are different causes of declining unemployment rate named lower interest rate, lower tax rate, improvement in skills of employees and increasing aggregate demand. Define Unemployment and their types in an economy Unemployment is the phenomenon that occurs when people have no work to do and they actively looking for a job. The unemployment rate is the percentage that is determined by separating the amount of jobless person by the amount of all currently working individual in the labor market (Pigou, 2013). Basically, three kinds of unemployment are found in Singapore named frictional, cyclical, and structural unemployment. Cyclical unemployment is one of the kinds of unemployment which arises due to lack of AD in the Singapore economy. Further, there is inadequate employments for each person who wish to job (Economics rush, 2016). In this type of unemployment, amount of jobless workers is larger than the amount of employment posts. Furthermore, frictional unemployment is another type of unemployment in Singapore economy. It defines the time duration between employment when an employee is seeking and switching jobs from one occupation to another (Pissarides, 2013). Besides this, structural unemployment is another type of unemployment within an economy. This type of unemployment arises due to unavailability of jobs for each person who looking for a job in the labor market (Pigou, 2013). Types of unemployment in the Singapore economy In Singapore, there are three main types of employment is available named structural, cyclical, and frictional unemployment. But, cyclical unemployment is a key basis of being without a job in Singapore because Singapore has a great outside division that is largely dependent on outside demand for the development of the economy. Due to the global downturn, global income has declined in Singapore economy consequently it leads to decline purchasing power, consumption, and net exports (Pigou, 2013). Further, demands for goods and services have declined consequently company cut back employees, which called cyclical unemployment. Government measures adopted to achieve full employment There are different measures used by the Singapore government to achieve full employment such as cutting interest rate, cutting taxes to boost the aggregate demand. Another measure is education and training, Employment subsidies, and Improve labor market flexibility. It is identified that government offers education and training to the unemployed person to build their skills and knowledge which enable the unemployed person to find out the employment in developing industries (Beveridge, 2014). For example, retrain the unemployed steel employees to have basic information technology skills so it assists the employees to search the work in the service sector. Moreover, Singapore government facilitates the subsidies for taking on continuing unemployed. It will be beneficial to build confidence and on the job training among the employees (Ehrenberg, and Smith, 2016). Furthermore, Singapore government makes policies to provide the flexible labor market because restricted labor market is the cause of increasing unemployment. Above graph depicted that inflation rate has declined from 5.2 to -0.5 from 2011 to 2015. It indicates that the value of money increases in the Singapore economy. Deflation is not necessarily bad but it can lead to economic stagnation and high unemployment. Further, it is analyzed that negative inflation occurs when the price falls due to a higher supply of goods as compared to the demand for goods (Focus Economics, 2016). Further, negative inflation occurs due to a reduction in money, credit and consumers spending in Singapore economy. Define Inflation and typical causes of inflation Inflation is the rate at which the amount of products and services is rising and the purchasing power of the money is declined. Further, the central bank of Singapore tries to set the limit inflation and avoid the deflation to the growth of the economy (Chand, 2016). There are two main reason of occurring inflation such as inflation caused by demand side is known as demand pull inflation and while it is originated by supply side then, it is known as cost-push inflation. There are different causes of demand pull inflation and cost push inflation. It is discussed as below: The main reason of occurring inflation is an increase in the money supply in the market because it leads to increase in the aggregate demand. Further, it is analyzed that high growth of nominal money supply may increase the rate of inflation in the market. Another cause is disposable income of people because it is identified that while disposable income increases then it increases in national income and decline in taxes and saving of the people. In addition to this, the cheap monetary policy is another cause that leads to rising in the money supply. It also increases aggregate demand of goods and services in the economy (Lim, and Sek, 2015). For example, while credit expands, it increases the money income of the borrowers and consequently increases aggregate demand relative to the supply. As a result, it leads to high inflation due to high monetary contribution. There are several causes of cost push inflation named shortage of factors of production, industrial disputes, and internati onal factor. It is analyzed that inflation arises due to lack of production factors named labor, raw material, power supply and capital. It leads to surplus capacity and decline in the industrial production. Further, industrial disputes such as trade union strike decline the production of firm consequently, reduces the supplies of goods (Chand, 2016). These disputes can be related to increasing in wages, decline labor hours and paid leaves, Causes of inflation in Singapore Economy In Singapore, inflation is caused by both side i.e. demand and supply. But, imported inflation which leads to cost push inflation is an important cause of inflation in Singapore economy. Singapore is an open economy and there are inadequate natural resources i.e. factors of production. Therefore, it has heavily relied on imports from other countries related to consumption goods and raw material (Chand, 2016). Moreover, exporting goods are made from imported raw material. As a result, it is analyzed that Singapore economy faced inflation due to the depreciation of the Singapore Dollar (SGD). Another cause of inflation is a lack of export competitiveness because it declines the demand for the currency of Singapore due to the overflow of Singapore dollars in the foreign exchange market. Government measures to achieve the stable price The central bank of Singapore takes a number of monetary actions to manage the quantity and quality of credit such as increases sell securities in the open market, bank rates; reserve ratio, and increases in margin requirement (Bodea, and Hicks, 2015). Along with this, Singapore government takes several fiscal measures to achieve the stable price such as reduction in unnecessary expenditure, an increase in taxes, and savings, and avoid the repayment of public debt (Wu, and Ramesh, 2014). Singapore government also makes rational wage policy, and makes policy to increase in the production which is beneficial to achieve the stable price in the Singapore economy. Conclusion It is concluded that GDP of Singapore economy has declined in 2015 as compared to previous year so the government takes several measures to achieve the production output performance such as try to cut down the interest rate, tax rate, and exchange rate. Further, it can be summarized that unemployment rate has declined in 2015 as compared to the earlier year. Therefore, Singapore government takes measure to achieve full employment named education and training, employment subsidies, and improve labor market flexibility. Along with this, it is stated that inflation rate has declined in 2015 as compared to past years so the government takes measure to achieve the price stability named control the quantity and quality of credit, reduction in unnecessary expenditure, increase in taxes, and savings, and avoid the repayment of public debt. References Beveridge, W. H. (2014).Full Employment in a Free Society (Works of William H. Beveridge): A Report(Vol. 6). UK: Routledge. Bodea, C., Hicks, R. (2015). Price stability and central bank independence: Discipline, credibility, and democratic institutions.International Organization,69(01), 35-61. Chand, S. (2016). Inflation: Meaning, Causes and Effects of Inflation. 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