Unemployment

Aims and Objectives

Aim: Understand types of unemployment Objectives: Define 2 measures of unemployment Explain current trends in UK & EU Analyse causes of unemployment Evaluate social costs of unemployment

Starter

Unemployment

Number of people willing and able to work but unable to find work. http://www.bbc.co.uk/news/u k-17043305 2.67 million 8.4%

LFS & Claimant Count

LFS Includes people who have looked for work in the past month and are able to start work in two weeks. Claimant Count Includes people able to claim JSA.

Equilibrium Unemployment
Price
ASL ALF

W1

ADL Q2 Q1 Qty of Employment

ALF = aggregate labour force of a nation. ASL = aggregate supply willing to work at W1. Unemployment = difference between ALF and ASL. Q2-Q1

Re-create on your whiteboards and explain.

Types of Unemployment
Frictional Unemployment People who are unemployed between jobs Structural Unemployment Unemployment due to declining industries such as mining or ship building Seasonal Unemployment Unemployment from seasonal jobs, e.g. Fruit picking

Cyclical Unemployment General unemployment which follows the business cycle

Technological Unemployment Unemployment due to technological advancements.

Cyclical Unemployment
PRICE LEVEL AD1
AD2 LRAS

Arises during downturn/recession

Fall in AD actual GDP lies below potential GDP negative output gap Labour derived demand

P1

Y2

Y1

REAL GDP

Unemployment rises

Classical Unemployment
Price

Wage rate increases More workers supply themselves QS Firms demand QD Unemployment QS-QD

ASL W2 W1

ADL

QD

Q1

QS Qty of Employment

Armies of the Unemployed

What may be the social costs in the EU of high unemployment?