Passage 1

Structural unemployment arises from mismatches between job availability and workers’ skills or locations, persisting even during economic booms. Technological change is a key driver, often shifting demand for certain skills. Gradual changes may not cause unemployment, as natural attrition adjusts the workforce. However, rapid shifts can displace workers who lack the skills for new roles. The extent of structural unemployment depends on resources allocated for retraining, relocation, or retirement. Other factors, like capital movement, also play a role. Increased structural unemployment complicates balancing low inflation and low unemployment. As demand rises, skill shortages inflate wages and prices, contributing to stagflation, simultaneous inflation and unemployment. While policies have focused on curbing inflation, they often increase unemployment. This highlights a philosophical tension: ensuring economic efficiency through modernization while protecting displaced workers through proactive public and private intervention.

The core argument of the passage is that:

(a)The persistence of structural unemployment, even during economic boom, indicates fundamental flaws in the market's ability to self-correct without government intervention.

(b)Technological progress, while beneficial for economic efficiency, creates social costs in the form of displaced workers, which requires a proactive and balanced policy response.

(c)Stagflation is an unavoidable outcome in economies experiencing rapid technological change and high structural unemployment, regardless of policy choices.

(d)The most effective approach to reducing structural unemployment is to slow down the pace of technological adoption to allow natural workforce adjustments.

Question

Passage 1

Structural unemployment arises from mismatches between job availability and workers&rsquo; skills or locations, persisting even during economic booms. Technological change is a key driver, often shifting demand for certain skills. Gradual changes may not cause unemployment, as natural attrition adjusts the workforce. However, rapid shifts can displace workers who lack the skills for new roles. The extent of structural unemployment depends on resources allocated for retraining, relocation, or retirement. Other factors, like capital movement, also play a role. Increased structural unemployment complicates balancing low inflation and low unemployment. As demand rises, skill shortages inflate wages and prices, contributing to stagflation, simultaneous inflation and unemployment. While policies have focused on curbing inflation, they often increase unemployment. This highlights a philosophical tension: ensuring economic efficiency through modernization while protecting displaced workers through proactive public and private intervention.

The core argument of the passage is that: 

(a)The persistence of structural unemployment, even during economic boom, indicates fundamental flaws in the market's ability to self-correct without government intervention. 

(b)Technological progress, while beneficial for economic efficiency, creates social costs in the form of displaced workers, which requires a proactive and balanced policy response. 

(c)Stagflation is an unavoidable outcome in economies experiencing rapid technological change and high structural unemployment, regardless of policy choices. 

(d)The most effective approach to reducing structural unemployment is to slow down the pace of technological adoption to allow natural workforce adjustments.

ONLiNE UPSC · Accepted Answer

Statement (a) is not correct. While the passage implies a need for intervention ("proactive public and private intervention"), its core argument is more focused on the nature of structural unemployment due to modernization and how to manage this tension, rather than a broad critique of market self-correction.

Statement (b) is correct. The passage highlights technological change as a driver of modernization (efficiency) but also of skill mismatches leading to displacement. It then stresses that the extent of this problem depends on adjustment resources and the need for "proactive public and private intervention," pointing to the need for a "balanced policy response" to these "social costs."

Statement (c) is not correct. Stagflation is presented as a potential consequence when demand rises amidst skill shortages. The passage advocates for interventions, suggesting that policy choices can influence the outcomes, rather than stagflation being unavoidable.

Statement (d) is not correct. The passage discusses adapting to technological change through retraining, relocation, etc. It doesn't suggest slowing down technological adoption as the "most effective approach." The focus is on managing the consequences of this change.

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