1. CHAPTER 30
Employment: Being involved in a
productive activity for which a
payment is received
Unemployment: Being without a job
while willing and able to work
Changes in patterns of employment:
1 Industrial structure
Proportion of population working in the primary, secondary and tertiary sector. It can change as the GDP and
education rate or foreign investment in an economy changes.
2 Women contribution
Rate of women contribution in the economy
3 Public & private sectors
Percentage of population working in public sector vs percentage of population working private sector in an
economy
4 Full time and part time
Rate of full time and part time workers in the economy
2. CHAPTER 30
Changes in patterns of employment:
5 Employed and self employed
Percentage of population which is self employed vs the percentage of population that is employed
6 Formal & informal economies
Informal economy is the part of economy that is neither taxed nor directly controlled by the government.
That will include all unregistered businesses, illegal businesses etc.
Percentage of economy that consists of formal vs percentage of economy that consists of informal economy
7 High and low quality employment
High quality employment is skilled work which is interesting and provides workers with the opportunity to
progress.
3. CHAPTER 30
Labor flexibility: A labor force which adjusts quickly and smoothly to changes in market condition
It would be easier for businesses to hire and fire employees if the labor force is flexible and the businesses
would be able to increase or decrease their workforce in accordance with the demand, however it would
increase the sense of insecurity among the employees
Other types of labor flexibilities include temporal flexibility, locational flexibility, functional and wage
flexibility.
Labor participation rate: The proportion of people who are of working age and belong to the labor force.
In other words economically active labor force.
Economically active: Those in labor force, both employed and unemployed
Economically inactive: Those not in the labor force
4. CHAPTER 30
Factors that influence the labor participation rate:
1 Wage rate
If the minimum wage rate in the economy is higher than the participation rate will be higher
2 Social attitude towards women
If it is socially acceptable for women to work in a society there will be higher contribution in the labor force
3 Provision for children and elderly
If availability of nursery places and retirement homes, higher labor participation
4 Contribution of the disabled to work
If there are more jobs available for the disabled people, there will be more labor contribution
5 School leaving age
If there are more people into full time education and the school leaving age is higher than the labor
contribution rate will be lower
5. CHAPTER 30
Measuring unemployment:
Claimant count: A measure of unemployment which counts those unemployed which receives unemployment
benefit.
There can be a proportion of population which does not receives unemployment benefit, claimant count ignores
them
Labor force survey: A measure of unemployment which counts as unemployed people who identify as such in
a survey.
Causes and types of unemployment:
Frictional unemployment: Temporary unemployment arising from workers being in between different jobs
It has further two types
Search unemployment: when workers do not accept the first job they get and spend time looking for other
jobs deemed suitable.
Seasonal or causal unemployment: When people are out of work between periods of unemployment i.e actors
6. CHAPTER 30
Structural unemployment: Unemployment caused by long term changes in the pattern of demand and
methods of production.
It has further
Regional unemployment: Caused by a decline in job opportunities in a particular area of the country
Technological unemployment: Unemployment caused by workers being replaced by capital equipment
Structural unemployment is more serious and difficult compared to frictional unemployment.
Increasing labor mobility can help reduce frictional as well as structural unemployment
Cyclical unemployment: Unemployment caused by a lack of aggregate demand.
It can lead to high rates of unemployment, lower investments, lower GDP growth rates and recession.
Expansionary fiscal and monetary policies can be used to increase aggregate demand.
7. CHAPTER 30
Unemployment if prolonged for a longer period of time can have drastic effects on an economy.
It can reduce firm’s confidence, lower foreign investment, businesses closing down, lower tax revenue collected
by the government, higher government expenditure due to unemployment allowance and lower GDP growth
rate.
To tackle structural unemployment government should use supply side policy to increase the labor mobility
TO overcome cyclical unemployment a government can use expansionary monetary and fiscal policy.
