low unemployment

• employment is the use of labour in the economy to produce goods and services
• full employment is when an economy uses most of its workers to produce an output, it is also the level of employment where there is no cyclical unemployment
• unemployment is those people of working age and ability who are both able and willing to work at current wage rates but cannot find employment
• the UK government measures unemployment using the claimant count, which measures unemployment according to the number of people who are claiming unemployment-related benefits
• the level of unemployment is the number of people in working population who are unemployed
• the rate of unemployment is the percentage of workforce that is unemployed
• unemployment rate = number of unemployed / workforce size X 100
• seasonal unemployment is when seasonal workers are not working outside of their specific season
• frictional unemployment is when workers leave their jobs and don't start their new job immediately, it is always present in an economy
• structural unemployment is caused by declines in some industries, demand may permanentely fall so industry will contract or close, making workers redundant or occupationally immobile
• cyclical unemployment is due to a fall in aggregate demand, aslo called demand-deficient unemployment

  1. fewer workers are needed to produce less output
  2. less income is spent by consumers
  3. less production due to less demand
  4. lower incomes
  5. fewer workers
• voluntary unemployment is when a worker decides not to work
• technical unemployment is when modern technology means fewer workers are required to produce a product
• benefits of unemployment:

  • economies need frictional unemployment as workers move to sectors with more demand
  • wages are kept low so workers compete for jobs
  • low wages means low costs so firms are more competitive (allowing competition with other countries)
• costs of unemployment to individuals:

  • lower standard of living (less disposable income)
  • loss of status or self-esteem (may lead to family breakdown)
  • excluded workers (workers unemployed for a long time become unemployable due to lack of experience and skill)
  • higher costs to taxpayers
• cost of unemployment to government:

  • labour resources are wasted (idle resources mean the country is not producing at full capacity)
  • recession (due to cyclical unemployment)
  • budget deficit (loses tax and pays more benefits, total consumer spending will decrease leading to even less tax (VAT))
• costs of unemployment to regions:

  • ares may suffer higher rates due to structural unemployment
  • less income means less spending (cyclical unemployment)
  • local population may decline
  • social problems (crime rates rise)
  • value of properties fall
  • leading to it becoming a 'depressed' area