Rushaun Burrell

November 03, 2023

5W Pool3 Economics
Graded Homework-Unemployment

1. Define the term unemployment

Unemployment refers to the state of any person who is actively seeking employment and is willing
and able to work but is unable to find work. It is typically measured as a percentage of the labour
force and is known as the unemployment rate which is an important economic indicator. For example:
If John is a 19-year-old young man who has just left high school and is able-bodied, without any
disabilities and is actively searching for work but cannot find any, then that would be considered
unemployment.

2. Describe three types of unemployment

● Search Unemployment
This refers to a type of unemployment that occurs when someone who is unemployed does not take
the first job that he or she is offered. This is typically due to them still being in search of a job that is
better paying or that is more tailored to their skill sets. For example: John recently graduated from
college with a degree in computer science. He has actively been looking for a job as a software
developer, he is seeing a couple of offers for jobs related to the field but he hasn't found one that he
deems suitable for him then that would be search unemployment because he could have gotten a job
but he decided not to take it and search for one that matches his preferences.

● Seasonal Unemployment
This refers to a type of unemployment where workers are left unemployed due to jobs being available
only at a particular time of the year or when they are in “season”. The workers here will typically find
employment when that industry or job is in season but for the rest of the year or when the job is out of
season, then they are left unemployed. For example, John makes artificial Christmas trees to supply
to homes during the Christmas season. He is normally hired around 2 months prior and straight
throughout Christmas but after the Christmas season has passed, he is left unemployed due to his
job being out of season so that is referred to as seasonal unemployment.

● Real Wage Unemployment

This refers to unemployment that is caused due to wages being raised above the equilibrium level. At
a wage above the equilibrium level, the supply of labour exceeds the demand for labour due to the
fact it creates a situation where the labour force would rapidly increase as a result of these attractive
wages and this supply of labour would be more than the number of job opportunities available so the
excess supply of labour would be left unemployed. This limited number of job opportunities is often
due to firms not being willing to hire at these high wage levels that are often set by minimum wage
laws, labour union negotiations etc. For example: Let’s say a government raises the minimum wage
significantly in a country. The minimum wage was $10 per hour and is now raised to $15 per hour.
Employers, especially in industries that traditionally paid lower wages, may find it difficult to absorb
the increased labour costs associated with the higher minimum wage and will typically cut back on
hiring which would cause real wage unemployment due to the fact that these people are actively
seeking and able to work but will not be employed due to the excess supply of labour as a result of a
rise in wages.
3. Explain, using examples, any three costs of unemployment
● Human Costs
This refers to a cost of unemployment where the morale of the person and even their family is
affected negatively. This includes them feeling hopeless, being under financial stress, not being able
to maintain their standard of living or enjoy a good quality of life, emotional distress or even falling into
depression. This is also costly to them as they face the danger of resorting to crime, drug abuse or
idleness. This also includes the possibility of them becoming unemployable due to their skills not
being practised and ending up diminishing and the person becoming what is known as “unskilled”.
For example, Mary lost her job due to a company downsizing. She struggled to find a new job for an
extended period, which resulted in financial difficulties, increased stress, and a sense of
hopelessness. Her family had to cut back on expenses, and the emotional toll on her and her loved
ones was substantial, this situation would be seen as a human cost of unemployment.

● Lost Tax Revenue

This refers to a cost of unemployment where there is a decrease in tax revenue for the government.
This is so because when people are employed they pay various types of taxes that contribute to the
government’s tax revenue and when they are unemployed they pay little to no taxes so there is a
reduction in tax contributions. This sets back the economy and country as a whole as this revenue
could have been used to further develop the country in terms of roads, infrastructure etc. For
example:In a recession, many individuals lose their jobs. As a result, there is a decline in income tax
payments and payroll tax contributions to the government. This reduction in tax revenue can limit
government expenditure on important areas in the economy and country.

● Increased Benefit Payments

This refers to a cost of employment where a burden is placed on the government to provide
unemployment benefits and relief programmes to reduce the severity of the effects of unemployment
in the economy. This means that the government will have to allocate a larger percent of their
revenue to these programmes and benefits which will also set back the economy because that money
could have been used to develop the economy in ways such as infrastructure. For example: During a
recession in Jamaica, a significant number of workers become unemployed. To assist these
individuals and their families, the government expands its PATH and other social assistance
programmes. This increase in benefit payments put pressure on government revenue and can even
lead to budget deficit.

4. List the formula for calculating the labour force participation rate
Labour force participation = (Labour Force/Population) x 100

5.Describe the term "underemployed"

This refers to a person who is employed in a job for which they are overqualified. Underemployment
also covers those persons who are only employed on a part time basis even though they are
available for full time work. This is typically due to them not being able to find any jobs. For example:
Mary has a bachelors degree in Business Management but works as a merchandiser then she would
be considered as underemployed.