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Unemployment
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Low unemployment is a key government objective. There are several types, with different causes, and all have costs.
Definition and measurement
Unemployment is when people who are able and willing to work cannot find a job.
The ILO (International Labour Organization) measure counts people without a job who have looked for work in the last four weeks and are able to start within two weeks.
Unemployment rate (%) = number unemployed ÷ labour force × 100
The ILO (International Labour Organization) measure counts people without a job who have looked for work in the last four weeks and are able to start within two weeks.
Unemployment rate (%) = number unemployed ÷ labour force × 100
Types
Cyclical: caused by a lack of demand in a downturn or recession.
Structural: caused by the long-term decline of an industry, such as coal mining.
Seasonal: jobs only available at certain times of year, such as tourism or fruit picking.
Frictional: people between jobs, usually short-term.
Voluntary: people choosing not to take jobs at the current wage.
Structural: caused by the long-term decline of an industry, such as coal mining.
Seasonal: jobs only available at certain times of year, such as tourism or fruit picking.
Frictional: people between jobs, usually short-term.
Voluntary: people choosing not to take jobs at the current wage.
Effects
Lost output and wasted resources: the economy produces inside its PPC.
Poverty for unemployed people and their families.
The government spends more on benefits and receives less tax revenue.
Lower consumer and business confidence.
Social problems for society, such as poorer health and crime in some areas.
Poverty for unemployed people and their families.
The government spends more on benefits and receives less tax revenue.
Lower consumer and business confidence.
Social problems for society, such as poorer health and crime in some areas.
A country's labour force is 30 million and 1.5 million are unemployed. What is the unemployment rate?
- 1.5 ÷ 30 × 100
Answer: 5%
ILO: without a job, looked in the last four weeks, can start within two weeks. Types: cyclical, structural, seasonal, frictional, voluntary. Costs: lost output, poverty, more benefits, less tax, lower confidence, social problems.
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