Employment and unemployment — practice question

Liberia, a country in West Africa, has encountered several major difficulties in recent years. These have included a civil war and, in 2014, the Ebola epidemic breaking out. There have also been gains. Unemployment stood at 85% in 2004 but had dropped to 4% by 2016. This fall has affected both emigration and wages. Workers have been paid more, although some economists believe the higher pay has pushed up the country’s inflation rate, which was 8% in 2016. The country has a reliable supply of drinking water and a climate that is suitable for agriculture. More than 70% of the labour force is now employed in agriculture. The country’s main exports are rubber, iron ore, timber and gold. A US multinational company (MNC) operates the world’s largest single natural rubber farming business in Liberia. Rubber prices fell by 75% between 2011 and 2016. Global supply of rubber was greater than demand because several countries brought in import restrictions on rubber. Faced with the lower price, the US MNC reduced output, yet it still recorded a loss. The MNC does not wish to fail and is attempting to stay in business by cutting costs. In the long term it aims to maximise profits. When some of its 7000 workers retire, they will not be replaced. The MNC has adopted new production methods and diversified into cocoa and coffee growing. The Liberian government is giving subsidies to local rubber farmers so that they can purchase new equipment and use improved farming methods. Even though the situation is difficult, some local Liberian rubber farmers are expanding their operations by buying more land. Others are diversifying by using timber from the rubber trees to produce furniture. Alongside support for its rubber farmers, the Liberian government is also promoting growth in the secondary and tertiary sectors. Between 2014 and 2016 it raised spending on healthcare, but this came at the expense of a number of public sector investment projects. Table 1 shows a comparison of infant mortality rate and healthcare spending per person in selected countries in 2015.