C4.7 employment and unemployment

employment

The economic use of labour as factors of production

unemployment

A person that is not working but is actively looking for a job

Full employment

situation when everyone in the economy who is willing and able to work has a job

Causes of changing patterns of level of employment

increase in proportion of workers employed in tertiary sector, greater propertion of women in labour work force due to changes of social attitudes, decline in employed in the public sector as a country moves towards market economy

formula to measure unemployment rate

Number unemployed / labour force x 100

Frictional unemployment

short lived unemployment as people change jobs

cyclic unemployment

occurs during periods of economic downturn or recession when demand for goods and services decreases, leading to job losses.

structural unemployment

long- lived unemployment caused by industrial decline

eg: many workers are unemployed and have skills that are no longer wanted

consequences of unemployment to individuals

loss of income , decrease in confidence, sense of failure, increase in stress

consequences of unemployment to firms

loss of sales revenue , loss of output ,

consequences of unemployment to the Economy

Increase in crime, vandalism, increase in anti-social behavior , increase in homeless people

Policies to reduce unemployment : demand side policy

The total demand for labour is derived from the demand for goods/services

If total demand for goods/ services increase there will be high demand for labour leading to lower unemployment

Policies to reduce unemployment: Expansionary fiscal policy (Government decrease cooperation tax)

Firms pay less tax → firms have more profit → firms hire more workers → firms increase output → unemploymentfalls

Policies to reduce unemployment: Supply side policy (aim to improve the quantity/quality of the factors of production thereby raising potential output)

If output increases then firms will require more workers to produce that output and unemployment may fall

Policies to reduce unemployment : Supply side policies (The Government reduces trade union power)

Trade union power weakens → firms lower wages → costs of production decrease → firms can produce more output with the same input → firms hire more workers as they are cheaper → unemployment falls