EMPLOYMENT

The process by which people provide labour in a productive process for which they
are rewarded with a wage or salary.

Full employment
 It occurs when all those willing and able to work at the given real wage are
working.
 It is the level of employment at which those who wish to work have found
jobs, with the exception of those who are frictionally unemployed.
 It is a situation where unemployment is low and employment is high.
 It is a government macro-economic objectives.

Employment trends
Over time, the pattern of employment in a country is likely to change. There can be
alternatives in the sectors in which people work, how they work, who they work for,
the type of work they do and the number of persons employed.
Most government shares an objective to maintain a high and stable level of
employment in their economies and a low level of unemployment. Employment
provides people with income and wealth, but unemployment wastes productive
resources.

Employment rate
The percentage of those of working age in employment. Or the proportion of the
population of working age who have work. A high employment rate means a
relatively low dependency ratio.

Employment by sectors of the economy

How many people work in the primary sector, eg agricultural, secondary sector, eg
manufacturing and tertiary sector, eg service.

Factors of employment rate

1. Attitude to working of women
2. Disabled labour
3. Participation in post-compulsory full time education
4. Preferred age of retirement
5. The level of economic activities
6. The gap between wages and benefits.
Labour force participation: the percentage of people of working age who choose to be
economically active in the labour force.

Employment rate: employment/labour force *100

Unemployment rate: is the percentage of the labour force that is unemployed

Unemployment rate: unemployed/labour force *100

Unemployment

The problem uncounted when there are people able and willing to supply labour but unable to
find work/job. It can also be described as a situation where people who are fit and willing to
work do not get work at the prevailing wage rates after due efforts. This leads to loss of income
and potential output.

Some of the reasons why workers lose their jobs include: fall in demand, high wage, lack of
information on jobs, technological advancement, unemployment benefits, the immobility of
labour prevents workers from finding new jobs.

Types/causes of unemployment

 Frictional unemployment: occurs as workings leave on job to spend some time looking
for another job. It is also when a person does not have a job due to the process of
moving from one job to another. Furthermore, it could also be the time period which
the worker is searching for job. Many people suffer from frictional unemployment such
as: university graduates who are searching for a job after graduating from university,
actors/theatre actors who are searching for a role in a movie/theatre play, football
players who have been released by their blubs and have been put in free agent transfer
waiting for team to sign them. Overall, frictional unemployment happens when it takes
the labour market time to match a worker up with a new job.
 Seasonal unemployment: occurs because consumer demand for some goods and
services are seasonal. Some jobs are available only during certain time of the year, for
example snow plowers in the winter, so during the other times of the year, that job is
unavailable, and the people who had that job previously would be unemployed until the
next time that season arrived. Other examples are those working in the building and
tourist industries.
 Cyclical unemployment: occurs when there is too little demand for goods and services
in the economy during an economic recession or downturns in an economy. If the total
demand for goods and services is too low in the economy, this means consumers will
spend less on goods and services. This causes many of the goods a firm produces to
 remain unsold, so the firm will decrease production and this comes in the form of laying
off workers. A cycle can also be created in the sense that a falling aggregate demand
means there are less goods and services purchased, so firms lower production by laying
off workers, and aggregate demand falls even further as less people are able to buy
goods and services.
 Structural unemployment: occurs when people are made redundant from declining
industries but lack the appropriate skills to enter a growing industries or are located a
long way from jobs available. It is caused by changes in the structure of the industry or
the economy. It develops when major industry suffering a permanent decline in the
demand for its product. Entire industries close down so many workers are made
unemployed as they possess skills no firm or employer desires and the workers are
made occupationally immobile due to this lack of skill so they cannot easily change jobs.
The structural unemployment could also come in the form of regional unemployment if
the industry which closed down was situated in a particular area so there are no jobs
available there.
 Technical unemployment: occurs where people have been made redundant as the
business invests in labour-saving capital equipment. This also occurs when
improvements in technology reduces the demand for labour. Labour is no longer
needed as much as it is relatively less productive and efficient. Example of this include in
the manufacturing industry, particularly in the manufacturing of cars on assembly lines.
Welders and painters are no longer needed due to robots and so unemployment is
created.
 Regional unemployment: this is unemployment concentrated in a specific region of a
country. It occurs when structural unemployment manifests in a particular region of a
country due to heavy regional specialization.

Consequences of unemployment

(A) On the unemployed/on the person/individual

 Fall in income: standard of living is lowered
 Lose of self-worth
 Decline in mental and physical health
 Lead to marriage break-ups
 Adverse effect on the education of children
 May reduce the chances of gaining another job because they lose out on
training in new methods and technology
 May out pressure on other family members and health-care services
 Pick pockets, armed robbery, prostitution are all social issues that may come up
 (B) On the firm
 Other firms may have new workers to recruit for expansion purposes
 Possibility of keeping prices down (inflationary pressure) by lowering wage rises.
 Possibility of reduction in demand, hence profit may fall
(C) On the government/economy
 It imposes an opportunity cost to the government
 Government tax revenue will be lower
 It puts pressure on government expenditure, e.g unemployment benefits, health
care
 Rising levels of crime: criminal activities to gain a higher income
 Unemployed workers mean that the economy is not using all of its resources:
total output will fall.

Implications for government spending and taxation

 The unemployed worker will be entitled to benefit, and if he/she is young, or older but
remains unemployed for a long period of time, he/she will be offered training.
 There is the less obvious cost of the loss of income tax revenues the worker would have
paid in work.

CONTROLLING UNEMPLOYMENT

 Demand-side policies
 Supply-side policies
 Regional policies: A variety of incentives have been used at different times: grants for
new investment, tax relief on new investment, subsidies on unemployment.