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.

Which of the following statements best reflect the most logical and rational inferences that can be made from the passage?

1.Structural unemployment stems from skill or location mismatches which are not directly resolved by general increases in economic demand.

2.Natural attrition, if allowed to run its course, can eventually resolve all forms of structural unemployment irrespective of its causes.

Select the correct answer using the code given below:

(a)1 only

(b)2 only

(c)Both 1 and 2

(d)Neither 1 nor 2

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.
 

Which of the following statements best reflect the most logical and rational inferences that can be made from the passage?

1.Structural unemployment stems from skill or location mismatches which are not directly resolved by general increases in economic demand.

2.Natural attrition, if allowed to run its course, can eventually resolve all forms of structural unemployment irrespective of its causes.
 

Select the correct answer using the code given below:

(a)1 only

(b)2 only

(c)Both 1 and 2

(d)Neither 1 nor 2

ONLiNE UPSC · Accepted Answer

Statement 1 is correct: Structural unemployment is defined by "mismatches between job availability and workers&rsquo; skills or locations." Policies boosting aggregate demand might create more job openings, but if unemployed workers lack the specific skills or are not in the right locations for these new jobs, the structural mismatch and unemployment persist.

Statement 2 is not correct: The passage states, "Gradual changes may not cause unemployment, as natural attrition adjusts the workforce. However, rapid shifts can displace workers..." This implies natural attrition is effective for gradual changes but not necessarily for resolving structural unemployment caused by rapid shifts or other persistent mismatches.

Unemployment

Structural Unemployment

Website Link

Test Your Knowledge

Student Resources