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17 EMPLOYMENT
Ch. 17 EMPLOYMENT
DEFINITION
“Unemployment generally refers to all those people between the ages of 16
and 65 or more willing and able to work, but are without a job.” In recent
years, however, this definition has officially been changed to ‘the number of
people registered as unemployed and claiming unemployment benefits.” It is
expressed as a proportion of the working population. [Employers and self
employed]. This shows a lower rate of unemployment.
OR
FULL EMPLOYMENT
The situation 100% employment is not possible, thus full employment refers to a
situation when the percentage of unemployed lies between 2% and 3 % or 97%
to 98% percent employment.
CAUSES OF UNEMPLOYMENT
i) Fall in demand
• Demand increases, production decreases, unemployment
increases
• Government spending decreases, incomes decrease, demand
increases, unemployment increases
• Inflation increases, exports Decrease, local production decreases,
unemployment did increases
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SALIMAH MUSHARRIF Ch. 17 EMPLOYMENT
TYPES OF UNEMPLOYMENT
The different types of unemployment arise due to immobility of labor and are
temporary.
i) Residual unemployment
There are always people who due to their physical or mental disabilities cannot
cope with modern production methods
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SALIMAH MUSHARRIF Ch. 17 EMPLOYMENT
CONSEQUENCES/EFFECTS OF UNEMPLOYMENT
Benefits
To those unemployed
It gives people time to explore job opportunities and apply for them
Provides leisure time
The unemployed may be offered training and education by the
government so that they may gain a more rewarding job
Unemployment benefits may be received
To society
It creates more flexibility in the economy in the sense that if there is a pool
of unemployed workers and the economy needs to expand, it can do so
relatively quickly and easily
It is said that unemployment decreases cost push inflation by lowering
wage claims, making workers more willing to learn new techniques and
trade unions are more reluctant to take action.
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SALIMAH MUSHARRIF Ch. 17 EMPLOYMENT
Costs
To the unemployed
Social costs
Status lost due to social stigma
It causes social adversities such as divorces, suicide, depression Etc
Increase in crime rate
To society
The main cost is the output lost. This is the opportunity cost of
unemployment. Even if unemployment later falls, the lost output cannot be
gained and people enjoy fewer goods and services than they could have
with higher employment.
The country produces inside its PPC
As unemployment is high, incomes are low so tax revenue is low. On the
contrary the government has to spend on unemployment benefits.
The government spending decreases as taxes decrease, so that social
projects are not taken up and the standard of living further falls.
The burden of the unemployed is not evenly borne by society, as the
minorities and those lacking skills will face higher unemployment.
Crime increases
ASSIGNMENT:
ADVANTAGES OF LOW UNEMPLOYMENT
SHOULD LOW UNEMPLOYMENT BE MAIN AIM OF GOVERNMENT
POLICY?
HOW UNEMPLOYMENT IN THE ECONOMY CAN AFFECT A
GOVERNMENTS BUDGET?
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