Employment and Unemployment

• What is employment?

  Refers to the use of factors of production in the economy, such as labour
• 1. High employment raises standards of living
  2. Promotes economic growth
  3. Increases tax revenues
  4. Reduces financial burden and opportunity cost to the government
  5. Prevents brain drain from the economy
  6. Reduces income and wealth inequalities
• What is unemployment?

  Occurs when people of working age are both willing to work but cannot find employment
• What is full employment?

  Everyone in a country who is willing and able to work has a job
• Changing patterns and levels of employment

  • Employment sector
  • Delayed entry to workforce
  • Ageing population
  • Formal sector employment
  • Female participation rate
  • Public sector employment
  • Flexible working patterns
• What is female participation rate?

  Measures the proportion of women who are active in labour force
• What is the formal sector employment?

  Officially recorded employment, where workers pay income taxes and contribute to country's official GDP
• What is the claimant count?

  The number of people who are out of work and claiming unemployment benefits.
• What is the labour force survey?

  Uses a standardised household-based survey to collect work-related statistics
• What is the unemployment rate?

  Percentage of a country workforce that is out of employment
• What is the formula of the unemployment rate?

  Number of unemployed/Workforce x 100
• Causes and types of Unemployment:

  • Frictional
  • Structural
  • Cyclical
• What is frictional unemployment?

  Transitional unemployment that occurs when people change jobs, due to time delay between leaving a job and finding/starting a new one
• What is structural unemployment?

  Type or cause of unemployment when the demand for products produced in a particular industry continually falls often due to foreign competition
• What is cyclical unemployment?

  Type or cause unemployment resulting from a lack of demand in the economy, which causes a fall in national income
• Consequences of unemployment:

  • Low self esteem, stress, depression, health problems, lack of dignity and homelessness, can lead to suicide
  • Family and friends may also suffer from lower incomes, may result in arguments
  • Local community suffers as a result of poverty, falling house prices and increased crime rates
  • Firms lose out as lower levels of consumer spending, investment and profit. Business failure occurs
  • Government faces high expenditure due to welfare benefits
  • Taxpayers money finance unemployment and welfare benefits
  • Economy as a whole suffers from being less internationally competitive
• Policies to reduce unemployment

  • Fiscal policy - Expansionary fiscal policy
  • Monetary policy - Loose monetary policy
  • Protectionist measures
  • Supply-side policy
• Supply-side policy to reduce unemployment:

  • Investment in education and training
  • Reduction in trade union power
  • Incentives
  • Reducing welfare benefits