unemployment

unemployment

looking for work, able to work but not in work

the claimant account

the number of people claiming jobseekers’ allowance (through universal credit)

cyclical unemployment

unemployment caused by fluctuations in the economic cycle

frictional unemployment

unemployment caused by difficulties moving between or into jobs

real wage unemployment

unemployment due to an increase in minimum wage

seasonal unemployment

unemployment due to less demand during a certain season

structural unemployment

unemployment due to lack of skills

natural rate of unemployment

the rate of unemployment when the economy is producing at its productive potential

i.e. frictional and structural

causes of frictional unemployment

1. after leaving education - takes time to find work

2. the welfare and tax system - discentivise people to join the labour force

3. contracts - may prohibit people to enter similar fields of work

consequences of unemployment

1. fall in GDP

2. lower wages for workers

3. long-term unemployment rate

4. greater budget deficit

fall in GDP

as unemployment increases, income in the economy will decrease and consumers will spend less, this will shift AD to the left and GDP will decrease

lower wages for workers

as unemployment increases, there are more workers seeking available jobs therefore workers will have less ‘bargaining power’ and wages will decrease

long term unemployment

as unemployment increases, people will lose skills from being out of work which will leave them structurally unemployed (scarring hysteresis) causing a long term unemployment rate

greater budget deficit

as unemployment increases, there is a decrease in tax revenue and an increase in welfare payments

gov borrowing increases and the budget deficit increases