Unemployment

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How is the unemployment rate calculated?

Unemployed ÷ Labor force × 100

What is meant by the labor force?

People who are employed plus those actively seeking work.

What are the economic costs of unemployment?

Lost output, lower productivity, increased government spending on welfare, lower tax revenue.

What are the social costs of unemployment?

Increased crime, family breakdown, increased poverty, social exclusion.

How might regional unemployment occur?

Due to the decline of certain industries in specific areas.

What is seasonal unemployment?

Unemployment due to seasonal changes in demand for labour.

What diagram shows unemployment from a fall in labor demand?

A labour market diagram with a leftward shift in the demand for labor.

Which types of unemployment are included in the natural rate?

Frictional, seasonal, and structural unemployment.

How can minimum wage legislation cause unemployment?

It can lead to a surplus of labour if set above the equilibrium wage.

What is cyclical unemployment?

Unemployment caused by a fall in aggregate demand in the economy.

Why is measuring unemployment difficult?

Discouraged workers and underemployment are not fully captured in official statistics.

Why might the unemployment rate understate actual unemployment?

It ignores discouraged workers and underemployed part-time workers.

What is frictional unemployment?

Short-term unemployment as workers transition between jobs.

What does the unemployment rate measure?

The percentage of the labor force that is actively seeking work but unable to find a job.

What diagram shows cyclical unemployment?

A labour market diagram showing demand shifting inwards or an AD/AS diagram showing a deflationary gap.

What are the personal costs of unemployment?

Stress, loss of income, permanent deskilling, reduced self-esteem.

What is structural unemployment?

Unemployment due to a mismatch between workers’ skills and job requirements - sectoral, regional and technological.

What is the natural rate of unemployment?

The sum of structural, frictional, and seasonal unemployment when the economy is at full employment.

What is a policy to reduce structural unemployment?

Investment in education and retraining programs.

What is hidden unemployment?

Unemployment not reflected in official figures, e.g., discouraged workers.

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