Macroeconomics - Low unemployment

Unemployment

when those actively seeking work are unable to find a job

How is unemployment measured

The Labour Force Survey is carried out every month and unemployment is defined by the ILO (International Labour Organisation)

The ILO defines unemployed people as:

• without a job, want a job, have actively sought work in the last 4 weeks and are available to start in the next 2 weeks, or

• out of work, have found a job and are waiting to start it in the next 2 weeks

Cyclical Unemployment

When an economy moves from a boom to a downturn, business activity slows and people are laid off. People loose their jobs because demand for good and services falls which causes businesses to lay off staff.

Structural Unemployment

When the structure of an economy changes such as the decline in an industry or if jobs are taken by machines.

Seasonal Unemployment

When seasonal workers, such as those in the holiday industry, are laid off because the season has ended. Little can be done to reduce it because it is usually linked to climate.

Voluntary Unemployment

When people choose not to work maybe because they are not prepared to work for the wages offered.

Frictional Unemployment

When workers are unemployed for a short period of time as they move from one job to another.

Output - Impact of unemployment

If people are unemployed then the productive potential of a country is not being fully exploited. As a result of this, national income and and living standards will be lower.

Use of scarce resources - Impact of unemployment

People who are out of work do not make any contribution to production. This is a waste of resources and results in lower levels of national income.

Poverty - Impact on unemployment

In some developing countries, many people have never worked in their lives. There have never been any employment opportunities for them. As a result they have to live in poverty.

Government spending on benefits - Impact of unemployment

In most developed countries, when people are unemployed they are entitle to receive some financial benefits from the state If unemployment levels rise, the government has to allocate more money to unemployment benefit.

Tax revenue - Impact of unemployment

When unemployment rises, tax revenues will fall because most taxes are linked to income and spending. G have less to spend and may have to cut public sector services. Or they have to borrow more which increases national debt or they have to increase tax rates

Consumer confidence - Impact of unemployment

During periods of high unemployment consumer confidence is likely to fall. Most people without a job have to suffer because their income falls as state benefits are generally lower than wages. Consumers will become cautious which results in low levels of spending.

Business Confidence - Impact of unemployment

When firms lay off workers they have to pay them redundancy money. Remaining workers will become demotivated as they may fear that they will be made redundant next. A firm is left with spare capacity when people are laid off which will cause a fall in demand. Sales are likely to fall when unemployment starts to rise because people have less to spend.

Society - Impact on unemployment

Unemployment can have an impact on local communities for example if most people in the town are working for the same business and the business shuts down then many people will become unemployed. As a result of this areas can become run down, small businesses start to struggle and fail- their customers are facing hardships