Unemployment | A-Level Economics Notes
These revision notes cover everything you need to know about Unemployment for A-Level Economics. They're designed for students studying AQA A-Level Economics, Edexcel A-Level Economics, and Edexcel International A-Level Economics. Written by Jaisul Naik, UCL Economics graduate and A-Level Economics tutor since 2017.
What is unemployment?
The number of people who are willing and able to work, but cannot find a job.
How is unemployment measured?
Labour Force Survey is a quarterly survey asking 60,000 households about their employment status. An individual is counted as unemployed if they are out of work but able to start work in the next two weeks.
Claimant Count is a count of those who are claiming unemployment benefits like Jobseekers Allowance.
What is seasonal unemployment?
When workers lose their jobs due to a lack of demand during a particular season e.g. tourism
What is frictional unemployment?
When workers are moving between jobs.
What is structural unemployment?
When there is lack of demand for the workers in one particular industry.
For example, UK steel industry (it is cheaper to import steel from China).
Workers need to re-train and work in another industry.
What is cyclical unemployment?
When there is a lack of aggregate demand in the economy, causing a lack of demand for workers across the economy. This changes along with the economic cycle.
What is real-wage unemployment?
Real-wage unemployment is unemployment that is caused when the wage rate in some labour markets is set above the equilibrium wage rate.
One reason for this might be a minimum wage that is set too high.
What is the impact of unemployment?
Unemployment means that those who are not working suffer from low or no income. This means declining living standards as people are not able to meet their needs and wants.
Unemployment is also costly to the government as they have to pay benefits and they can collect less income tax revenue.
Unemployment can benefit firms because they have more workers to choose from, giving them more bargaining power.
Overall, unemployment is likely to be bad for the economy as it is linked with lower levels of consumer spending and therefore lower aggregate demand and a decline in real gdp.
Summary questions
- What is unemployment?
- How is unemployment measured?
- What is seasonal unemployment?
- What is frictional unemployment?
- What is cyclical unemployment?
- What is structural unemployment?
- What is real-wage unemployment?
- Why is the impact of high unemployment?
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