Unemployment occurs when people are without jobs and actively seeking work. The unemployment rate is the percentage of the labour force that is unemployed. The labour force is the total number of people who are either employed or unemployed.
The four main types of unemployment
- Structural unemployment occurs when there are not enough jobs available for the number of people who want to work. This can happen when there are changes in the economy, such as when a factory closes or when a new technology makes some jobs obsolete. In the UK this was very evident when the mines closed during the 1980s, AI may be responsible for structural unemployment in the future.
- Cyclical unemployment occurs when the economy is shrinking and there are not enough jobs for the amount of people looking for jobs. Often called demand deficient this type of unemployment is usually temporary and reduces once the economy recovers.
- Frictional unemployment occurs when people are between jobs. This can happen when people are first entering the labour market, when they are changing jobs, or when they are laid off from their jobs and are looking for new ones. As you leave university to look for your first job you would be considered to be in frictional unemployment.
- Seasonal unemployment occurs when there are certain times of the year when there are fewer jobs available. This type of unemployment is temporary but reoccurs each year. A great example is Ski resort workers, there is very little demand for ski resort workers during the summer months.
Measuring Unemployment
Unemployment can be measured in two ways
- The Claimant Count- This measures the number of people currently claiming out of work benefits. It is easy to measure the number however there is little qualitative data that can be gained from this measure.
- The Labour Force Survey - This is a quarterly survey of around 40 000 households to gain valuable insight into employment and unemployment in the UK.
Impacts on Unemployment
Unemployment can have a number of impacts on individuals, families, and the economy as a whole. These impacts can include:
Impact on firms
Impact on firms
- Reduced productivity: When workers are unemployed, they are not producing goods or services. This can lead to reduced productivity for firms.
- Costs: Firms may have to pay higher wages to attract workers when unemployment is low. They may also have to provide more training and benefits to workers.
- Reduced profits: Reduced productivity and increased costs can lead to reduced profits for firms.
- Financial hardship: Unemployed workers may have difficulty making ends meet, especially if they have dependent children. They may have to rely on savings, family support, or government welfare to achieve a decent living standard.
- Psychological stress: Unemployed workers may experience stress, anxiety, and depression. They may feel like they are a burden to their families and society. This can also lead to social isolation or exclusion.
- Increased crime: Unemployed workers may be more likely to commit crimes in order to earn an income.
- Reduced spending: Unemployed workers have less money to spend, which can lead to reduced demand for goods and services. This can hurt firms and the economy as a whole.
- Increased poverty: Unemployed workers are more likely to live in poverty. Poverty can lead to a number of other problems, such as poor health, crime, and social unrest.
- Increased government spending: Governments may have to spend more money on unemployment benefits and job training to help unemployed workers. This can put a strain on government budgets.
- Reduced tax revenue: When unemployment is high, businesses make less profit and pay less taxes. Overall tax revenue can fall and lead to governments increasing their borrowing.
- Social unrest: High unemployment can lead to social unrest, such as protests and riots. This can destabilise society and make it difficult for governments to function.
