Unit 4.5 - Unemployment

• Unemployment terminology


  • Unemployment
  • Homemakers
  • Economically active
  • Economically inactive
  • Labour force
• Labour force


  The employed and the unemployed
• Labour force participation rate

  The proportion of the population that are of working age and who are either working or actively seeking work
• Unemployment rate


  Unemployed workers as a percentage of the labour force

  
• Level of unemployment


  The number of employees that are unemployed

  
• Reasons for entering unemployment

  • Dropped out of school
  • Made redundant
  • Voluntarily left job
  • Improved health
  • Stopped being a homemaker
  • Migrated into the country
• Reasons for leaving unemployment

  • Entered higher education
  • Found employment
  • Became ill
  • Became a homemaker
  • Became a discouraged worker
  • Emigrated
• Claimant count measure


  Those unemployed who register as unemployed in order to claim unemployment benefits, cheaper and easier to obtain, but not fairly accurate

  
• Labour force survey method

  Conducting a survey asking people if they are employed, unemployed or economically inactive, more extensive but time consuming
• Causes of unemployment


  • Frictional unemployment
  • Structural unemployment
  • Cyclical unemployment

  
• Frictional unemployment


  Voluntary unemployment, search unemployment, casual unemployment, seasonal unemployment

  
• Structural unemployment


  Regional unemployment, technological unemployment, international unemployment
• Cyclical unemployment


  Lack of aggregate demand, also known as demand-deficient unemployment, e.g. due to a recession
• Consequences of unemployment


  • Fall in income
  • Difficulty finding a new job the longer they remain unemployed
  • Miss out on potential training - their skills become outdated
  • Loss of confidence
  • Decline in mental and physical well-being
  • Economy will operate below its potential
  • Frictional and structural unemployment could provide the opportunity to search for better jobs
  • Firms wanting to expand have a greater choice
  • Firms could benefit from unemployed not demanding higher wages