Unemployment

• Unemployment


  The number of people who are willing to work and able to work but cannot find jobs
• Unemployment rate


  The percentage of the actual labor force that is unemployed
• Calculating unemployment rate


  Unemployment Rate = Number unemployed / Labour Force x 100
• Calculating labour force


  Labour Force = Employed + Unemployed (but in search of a job)
• Calculating labour force participation rate

  Labour Force Participation Rate = Labour Force / Population x 100
• Natural rate of unemployment

  The level of unemployment when GDP is at its potential level in the long run (i.e. when all resources are fully used up in the production process)
• Voluntary unemployment refers to people who choose not to work even though they are able to work
• Potential labour force


  The actual labor force and those who are voluntarily unemployed
• Underemployment


  Individuals are either overqualified for the jobs they do or they may have jobs that do not fully utilise their skills
• Types of unemployment


  • Frictional unemployment
  • Structural unemployment
  • Cyclical unemployment
  • Seasonal unemployment
  • Real wage/Classical unemployment
  • Regional unemployment
• Frictional unemployment


  • is when a person switchs jobs
• Structural unemployment


  • is when a business closes down and a new one open backs up in its place
• Technological unemployment


  • A form of structural unemployment that occurs when technological advances reduce the demand for labour and makes some jobs redundant
• Cyclical unemployment


  • is associated with trade cycle
• Seasonal unemployment


  • is when unemployment rises due to the seasonal demand in certain markets
• Real wage unemployment


  • is when wages are 'too' high because the supply of labor exceeds the demand for labour
• Costs of unemployment


  • Inefficiency
  • Government spending on unemployment relief programs and benefits
  • Lower tax revenue
  • Increases in crime
  • Increased poverty
  • Migration
• Solutions to frictional unemployment

  1. Provide information to people seeking jobs via websites, social media, advertising

  2. Firms state necessary skills and qualifications required
• Solutions to structural unemployment


  Training and re-training programmes to improve the skills of the workforce
• Solutions to cyclical unemployment

  1. Expansionary fiscal policy (reduce taxes, increase government spending)

  2. Expansionary monetary policy (decrease corporate taxes, decrease interest rates)
• Solutions to seasonal unemployment

  Provide training programs to allow workers to obtain new skills for other jobs
• Solutions to real wage/classical unemployment

  1. Government can give tax credits to firms if they agree to hire more workers

  2. Firms can be given tax credits for training workers