Unemployment

Employment

Use of labour in the economy to produce goods / services.

Unemployment

Number of people who are willing, able and actively seeking employment but cannot find it.

Rate of Unemployment

The percentage of the country’s workforce that is unemployed.

Economically inactive

People who are not included in the workforce of an economy, therefore not considered unemployed.

Examples of Economically Inactive People

• Pensioners

• Full-time students

• Stay at home parents

• Very ill or disabled people who cannot work

Unemployment rate EQUATION

(number of unemployed / workforce) x 100

What are the two ways of measuring unemployment?

• Claimant count

• Labour Force Survey

Claimant Count

The measure of unemployment based on the number of people claiming unemployment-related benefits.

How accurate is the Claimant Count?

Some believe it underestimates unemployment: as some people are too proud to claim benefits

Whilst some believe it overestimates unemployment: as some people work but still claim benefits

Labour Force Survey

Measuring unemployment by counting unemployed people through a survey

Advantage of Labour Force Survey

It is used internationally: makes it possible to compare unemployment rates between countries

Full Employment

Situation where everyone willing to work at the going wage is able to get a job (97% or more)

Full employment is not possible because of ___, ___, ___ and ___ unemployment

Cyclical, Seasonal, Fractional AND Structural

Fractional Unemployment

Caused by time lags when workers move between jobs.

→ E.g. a national chain of shops closes down

Seasonal Unemployment

Caused by a fall in demand during a particular season.

→ E.g. Seaside hotels closing for the winter period

Structural unemployment

Caused by a permanent decline of an industry.

→ E.g. A coal mine closes down: workers have specific skills, finding it hard to find work elsewhere

Cyclical unemployment

Caused by a lack of demand of goods / services in an economy.

→ Economy enters a period of declining economic growth

Benefits of unemployment

1. Shows how people are confident in the economy and believe they can find a better job by quitting their current job.

2. If unemployment rises → wage rates are kept down → whilst not good for workers, it’s a benefit for firms as they don’t need to raise wages to attract workers

   → Lower wages = lower costs → firms can become more internationally competitive

Cost of unemployment for INDIVIDUALS

• Lower living standards: lose their wages → benefits income may be even lower = buy less goods / services

• Potential Homelessness: loss of income → not enough income to meet housing costs

• Stress and Health Problems: start showing signs of depression, mental anxiety and health complications

unemployment costs for GOVERNMENT

• Increased government borrowing: higher unemployment = lower tax revenue = less money

• Increased spending on benefits: higher unemployment = people have no income → claim benefits = less money for the government

unemployment costs for REGIONS / COUNTRIES

• Lower GDP for economy: higher unemployment = economy working below full capcity = lower production and output → lower spending / demand

• Increase in social issues: high unemployment = higher crime rates and vandalism