Introduction to unemployment


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Introduction to unemployment

  2. 2. Introduction to Unemployment Learner outcomes:  Students should be able to identify different types of Unemployment.  Students should demonstrate understanding of the causes of unemployment.  Recognise the implications/cost of unemployment : to the Individual & Governments.
  3. 3. Unemployment Definition:  Unemployment is an economic condition where an individual or individuals seeking jobs cannot manage to get themselves economically employed. The level of unemployment differs with economic conditions and other market forces. Read more at  Buzzle: of-unemployment.html
  4. 4. Types of Unemployment  Demand-deficient or Cyclical unemployment  Seasonal unemployment  Frictional or Search unemployment  Structural unemployment
  5. 5. Demand-deficient or cyclical unemployment  Demand-deficient unemployment occurs when there is not enough demand to employ all those who want to work.  Also known as cyclical unemployment - because it will vary with the economic cycle. When the economy is booming, there will be lots of demand and so firms will be employing large numbers of workers. Demand-deficient unemployment will at this stage of the cycle be fairly low. If the economy slows down( recession), then demand will begin to fall. When this happens firms will begin to lay workers off as they do not need to produce so much. Demand-deficient unemployment rises.
  6. 6. Seasonal unemployment Seasonal unemployment is fairly self explanatory. Father Christmas tends to only be in demand for a short period of the year, and the rest of the year would certainly be classified as seasonally unemployed. Most other seasonal unemployment is less severe than this, and tends to occur in certain industries. Industries that suffer particularly are:  Hotel and catering  Tourism  Fruit picking  Father Christmases The effects of seasonal unemployment are often highly regionalised. Areas such as Cornwall suffer a great deal from this type of unemployment.
  7. 7. Frictional or search unemployment  When somebody loses their job (or chooses to leave it), they will have to look for another one. If they are lucky they find one quite quickly, but they may be unlucky and it may take some time. On average it will take everybody a reasonable period of time as they search for the right job. This creates unemployment while they look. The more efficiently the job market is matching people to jobs, the lower this form of unemployment will be. However, if there is a lag in information and people don't get to hear of jobs available that may suit them then frictional unemployment will be higher.  The better the economy is doing, the lower this type of unemployment is likely to be. This is because people will usually be able to find jobs that suit them more quickly when the economy is doing well.
  8. 8. Structural unemployment  Structural unemployment occurs when the structure of industry changes. As an economy develops over time the type of industries may well change. This may be because people's tastes have changed or it may be because technology has moved on and the product or service is no longer in demand. In the UK many industries that were once major employers have now all but disappeared. Shipbuilding and mining are prime examples of this sort of trend, but there are also many more minor examples as well. The extent of structural unemployment will depend on various things:  Mobility of labour - if people are able to quickly switch jobs from a declining industry to a rapidly growing one, then there will be less structural unemployment.  The pace of change in the economy - the faster the changes taking place in people's tastes and demand and supply, the more structural unemployment there may be as industry has to adapt more quickly to change.  The regional structure of industry - if industries that are dying are heavily concentrated in one area, then this may make it much more difficult for people to find new jobs. Both the shipbuilding and mining industries were heavily concentrated and some areas have taken many years to adapt and reduce the level of structural unemployment.
  9. 9. Causes of Unemployment  Changes in the characteristic of the labour market: more women, older/young workers, better education, better health standards.  Changes in Government policies: Minimum wage, Unemployment benefits.  Technological Changes: Increased use of machines and Robotics.  Economic Slowdown ( Recession).
  10. 10. Implications/Costs of Unemployment For the Individual:  They may lose their self-esteem and confidence. This may affect their motivation to work. The longer they are unemployed the more they may lose their skills and this has to be bad for the economy as well.  On top of that these problems (and financial ones) often lead to the unemployed being less healthy, and then the NHS picks up the bill.  The whole economy suffers from people being unemployed.
  11. 11. Implication/Costs of Unemployment For the Economy:  Loss of output to the economy - the unemployed could be producing goods and services and if they aren't, then GDP is lower than it could be.  Loss of tax revenue - unemployed people aren't earning and they therefore aren't paying tax. The government has lost out.  Increase in government expenditure - the government has to pay out benefits to support the unemployed. Along with the loss of tax this is a 'double whammy'.  Loss of profits - with higher employment firms are likely to do better and make better profits. If they make less profit because of unemployment, they may have less funds to invest.
  12. 12. Sources: The End Unemployment