FORM 5 ECONOMICS NAME:_______________________

This is a situation where there are more people seeking jobs than there are jobs available. A person who is actively
seeking employment and is willing and able to work but is unable to find work is considered unemployed.

Unemployment rate:
Number of persons unemployed x 100

labour force

Unemployment Rate in Jamaica increased to 16.30 percent in the second quarter of 2013 from 14.50 percent in the first
quarter of 2013.

A PERSON CAN BECOME UNEMPLOYED IN SEVERAL WAYS:

 Voluntarily leaving a job.

 The individual was fired or laid-off from a job.

 The individual's job was phased out for a variety of reasons; currently technology is a big
factor in job replacement-related unemployment.

 The individual left the workplace for personal reasons, like maternity leave, injury or illness.

TYPES OF UNEMPLOYMENT
 FRICTIONAL

 SEASONAL

 STRUCTURAL

 CYCLICAL/GENERAL/DEMAND DEFFICIENT

 REAL WAGE

 CASUAL

 RESIDUAL

 TECHNOLOGICAL

 SEARCH

Cyclical unemployment

Cyclical unemployment exists when individuals lose their jobs as a result of a downturn in aggregate demand.
CAUSES: SLUMP IN WORLD TRADE CAUSING A FALL IN DEMAND FOR EXPORTS, REDUCTION IN GOVERNMENT
SPENDING AND NEW MACHINES INTRODUCED.
REMEDY: INCREASE GOVERNMENT SPENDING (REFLATIONARY FISCAL POLICY), LOWER
INTEREST RATES(REFLATIONARY MONETARY POLICY)

Frictional unemployment
Frictional unemployment, also called search unemployment, occurs when workers lose their current job and are
in the process of finding another one. This form of unemployment relates to the jobless rate that moves upward
as career professionals drift between jobs for a variety of reasons, including:

 Workers who move to another state, city, or town and are looking for a new job.
 Workers who leave their jobs with a goal of finding a better one.
 College graduates with advanced degrees who, after earning a post-graduate degree, return to the
workforce when they find a new job related to their studies.

Seasonal unemployment

Seasonal unemployment exists because certain industries only produce or distribute their products at certain
times of the year. Industries where seasonal unemployment is common include farming, tourism, and
construction

Structural unemployment

Structural unemployment occurs when certain industries decline because of long term changes in market
conditions. For example, over the last 20 years UK motor vehicle production has declined while car production
in the Far East has increased, creating structurally unemployed car workers.

REAL WAGE

This is when trade unions succeed in raising the wage rate above equilibrium level. At wages above equilibrium level,
supply of labour far exceeds demand for labour. The surplus labour is unemployed.

CAUSES: WAGE RATE ABOVE EQUILIBRIUM

REMEDIES: ENSURE LABOUR MARKETS ARE MORE ACCOMMODATING, WAGE FREEZE

DIAGRAM SHOWING REAL WAGE UNEMPLOYMENT

CASUAL UNEMPLOYMENT

This takes into account those persons who work on an on and off basis. They only work when work is available
otherwise they remain unemployed.

REMEDY: RETRAIN TO WORK IN DIFFERENT AREAS.

RESIDUAL UMEMPLOYMENT

This is where persons in a community are unemployed because they do not have the capacity to undertake gainful
employment. Persons who have some kind of disability or illness that prevents them from working would fall under this
category.

TECHNOLOGICAL UMEMPLOYMENT

This type of unemployment may occur due to a firm using a new technique or the latest technology in its operation and
as a result will have to lay off workers. For example an accounting firm opting to use computer in its operations may lay
off a number of accounting clerks

UNDEREMPLOYMENT

This is a situation where either persons are working less than the normal work week and are seeking additional
employment or are doing jobs below their level of ability.

Benefits of unemployment

 The unemployed have the opportunity to do extra training or to pursue additional hobbies. This will enable
them to get better jobs.

 This reduces cost-push inflation as there are fewer workers demanding higher wages so this puts less pressure
on prices.

 Workers will be more productive as they want to keep their jobs. This is because the labour market is over
crowded.

Possible cost of unemployment

 The unemployed do not have the economic means to enjoy a good quality of life. Unemployment has led to a
fall in standard of living.

 These unemployed persons may become depressed and this may lead to social problems such as crime and
violence.

 Some factors of production will remain idle which results in a loss of output.