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Ch. 30 - Employment and Unemployment

IGCSE®/O Level Economics
• Working age  WORLD BANK : those between 15
– 64.
• Workforce  those people between 15 – 64 who
are able to work whenever there’s a demand for
• Not included in the workforce :
– Below 15 and above 64
– Students
– Housewives, disabled3
economically active population = total supply of labour
The labour
force participation rate measures the percentage of the
population of working age that is economically active, i.e. either in work
or looking for work and therefore able to produce goods and services
Male participation rates have been falling: traditional male-dominated sectors such as mining and
manufacturing industries have been shrinking, particularly in many developed countries
Female participation rates have been rising: the cost of living is rising in many countries; it is now more
acceptable for women to work in many cultures; service industries are growing; there are more part-time
Causes and types of unemployment
Frictional unemployment: Short-lived
unemployment as people change jobs
Aggregate demand
$ billion
Cyclical unemployment: prolonged,
widespread unemployment during an
economic recession due to falling and
depressed aggregate demand
Causes and types of unemployment
Seasonal unemployment: temporary
unemployment because some
production and consumer demand is
Can cause a
concentration of
Structural unemployment: long-lived
unemployment caused by industrial
decline: many workers are made
unemployed and have skills that are no
longer wanted
Which group is economically active?
a. Full-time students
b. Those are too sick to work
c. Those who are officially classified as
d. Those who are retired
Which one is considered as a full-time employee?
a. A 16 years old girl dropped out from school since her
parents passed away in an accident and now she’s
been working as an administration staff in a business
for 3 years.
b. A mother of three is running an online clothing store
c. A college student applied a job in Wendy’s and he’s
now working after school hours
d. An Indonesian student studying in US having summer
holiday for three months and work in the campus
The cause of frictional unemployment:
a. Domestic consumers buying more imports
b. The lack of aggregate demand
c. The introduction of new technology
d. A lack of information about job vacancies
Which factor may cause official unemployment
figures to understate the actual level of
a. People being ashamed to admit they are
b. People being prepared to cheat the system
c. People who have found employment when the
measurement were taken
d. People working in the info
Which one will create seasonal unemployment?
a. There are more land being used to build
factories in the villages in country A
b. The amusement park in country A closes down
in winter
c. There’s falling demand in country A
d. There are many people looking for better jobs in
the city
Which one will increase the unemployment in a
a. Bank lending
b. Imports
c. Increased disposable income
d. Government spending
1. Why might a fall in unemployment increase the
inflation rate?
2. Describe three causes of unemployment !
3. What are the main disadvantages of
unemployment in a country?
4. Explain whether an increase in spending would
increase employment.
What is meant by
demand and supply
of labour ?
Labour market failures and
imperfections may restrict employment
XPowerful trade unions may restrict the
supply of labour to an occupation to
boost wages
XThe payment of unemployment
benefits may reduce the supply of
labour and increase voluntary
What is meant by
this ?
XHigh non-wage costs, including employers’contributions to fund
publicly provided unemployment and welfare benefits, may reduce the
demand for labour
XMinimum wage laws may reduce the demand for less skilled labour
XLabour immobility can prevent unemployed people from moving to
new jobs
Occupational immobility: inability to move to a new
occupation because a worker
lacks transferable skills
Geographic immobility: inability to move location to
take a new job because of family ties and commitments
(e.g. children at school), or regional differences in house
prices make it unaffordable
The personal costs include:
•loss of income
•possible loss of self-esteem, leading to
depression, health and marriage problems.
The costs to government include:
•loss of income tax revenue
•higher public spending on unemployment
and welfare benefits
The costs to an economy
•Unemployment is a waste of resources:
output is lower than what it could
otherwise be
•Taxes may have to rise to pay for
increased welfare payments