Employment and unemployment

Employment trends

Most governments want to keep a high and stable level of employment and a low unemployment level. This is because employment provides people with incomes and wealth, and unemployment wastes productive resources.

Definitions

Labour force: The total number of people of working age in work or actively seeking work.

Labour force participation rate: The labour force as a proportion of the total working-age population.

Employment by industrial sector: How many people work in agriculture and manufacturing industries, relative to services.

Employment status: The number of people employed full-time, part-time or in temporary work.

Unemployment: The number of people registered as being without work, and as a proportion of the total labor force (this is the unemployment rate)

Labour force

Labour force is the working population or economically active population of a country. This number equals the total supply of labour in both the private and public sectors plus any other speical sectors, and includes everyone of working age who is able and willing to work. The term "dependent population" is used to refer to the people who are not economically active in the labour force, such as students, stay-at-home parents, retired people and prisoners, as well as peope who simply do not want to work.

Labour force participation rate

The labour force participation rate includes the people that are actively looking for work or are currently employed. This value has been usually decreasing for the past few years, as there are more younger and older people in the economy, who are legally unable to work.

Employment by industrial sector

Male participation rates have been falling from 80 to 100 per cent of males looking for work in the 1990s to around 78 per cent bz 2009. This is because of previously male dominated sectors, such as mining and manufacturing. As female participation has increased, male participation has gone down in these countries.

Employment status

Most workers are in full-time employment. This means that they work for about seven to eight hours a day. These work hours can change between different countries, so they might be different somewhere else in the world. There is also part-time employment, which means that workers work for less weekly hours, which is one of the primary reasons why working hours have gone down in many countries.

Unemployment

To be considered unemployed, you need to be actively looking for a job. People who are unemployed will usually get some government benefits so that they can be able to maintain the state of their lives without an issue. There is also special economical protection if you get fired from your position, usually in the form of a percentage of what you would've earned if you were still working. These benefits are called welfare or unemployment benefits.

Unemployment rate

The unemployment rate is the percentage of people who are trying to find work, i.e. unemployed in an econonomy. This figure has been decreasing globally for the past years and in most developed countries, it lies at around 6%, but this can be much higher in LEDCs, such as 25% average in Africa. The global economic recession from 2008 and 2010 has affected these unemployment figures negatively, and most economies are working hard to try to reduce this number.

Causes and consequences of unemployment

Types of unemployment

Frictional unemployment

Frictional unemployment is what happens when workers change from one work to the other. This has a small impact to the economy, as people that are "in between" jobs usually find work in a short period of time.

Seasonal unemployment

Seasonal unemployment occurs in specific jobs, where working is only needed in some parts of the year. For example, being a ski teacher, you do not need to work in summer because there is usually no snow on the hills to be able to ski on. This means that you will be unemploymed during the summer, or during some season of the year, hence the name, seasonal unemployment.

Cyclical unemployment

Cyclical unemployment happens when there is too little demand for the goods or services that workers are producing. Companies who are suffering from this will fire workers because they do not need so many and cyclical unemployment is the impact it will have on the economy.

Structural unemployment

Structural unemployment is caused by changes in the structure of an economy. This includes changes involving companies moving away from the country to other cheaper countries to produce the same goods and servics, or other reasons which benefit the company, such as lower wages, etc. This can cause a special type of unemployment called regional unemployment, which we will see next.

Regional unemployment

Regional unemployment is a type of structural unemployment which occurs when firms move to other parts of the world because of better wages or other economical reasons and a "region" is left unemployed. Nowadays most workers in developed countries are employed in services.

Technological unemployment

Technological unemployment occurs due to changes in technology that affect the way goods and services are produced. Technology can be released that makes workers less valuable and less efficient in the production of something.

These causes of unemployment can be organised into different categories:
Casual and season factors: Frictional and seasonal unemployment
Falling aggregate demand: Cyclical unemployment
Structural change: Structural and regional unemployment
Technological change: Technological unemployment

Imperfections in the global market

Powerful trade unions may force up wages

Trade unions can threaten companies to increase wages of their workers without actually increasing productivity. This means that there will be less demand for labor. Often, reducing the power of trade unions will result in lower wages but higher employment.

Unemployment benefits may reduce the incentive to work

If the government provides unemployment benefits that are almost as good as working, then many people might simply want to not work at all and live off these unemployment benefits. This is why the government must find a good balance when making unemployment benefits. Voluntary unemployment occurs when people simply do not want to work because of the good unemployment benefits. It is also not fair for people under involuntary unemployment, in other words, they didn't choose to be unemployed because of these good benefits, they were simply fired and actually want the job.

Other employment costs can reduce the demand for labor

Another factor that affects how many workers a firm can employ is other additional costs apart from wages. For example, taxes and contributions to unemployment benefits. If these additional costs are too high, employment will decrease.

A lack of information can prevent people from finding jobs

Workers may never be aware of the job opportunities around them because of lack of information, or simply because it is too expensive to look for a job and not worth then time. To prevent this, governments should provide special advice and assistance to unemployment people in order to find work.

Minimum wage legislation may reduce labor demand

If the minimum wage in an economy is set too high, firms will not be able to hire so many workers as they could before, and therefore, will reduce the employment rate.

Labor immobility prevents workers from finding new jobs

Labor immobility means that workers cannot easily find another job. There are two main reasons for this:

Occupational immobility happens when workers find it hard to switch to other jobs because extensive re-training is needed to work. For example, an engineer can't work in a hospital without training,

Geographical immobility happens when workers don't wan to or are unable to move to a different area to find work. This could be because of house prices, or family situations.

Costs of unemployment

Personal costs

People who lose their jobs will need to rely on charity or government benefits. Also, if people are unemployed for a long period of time, they will lose their skills and can find it harder to find work. These people can also be depressed, or even ill and have a negative impact on the family members and health-care services.

Fiscal costs

Unemployment benefits payed by the governemnt to unemployed people are a signficant cost for the economy. It is therefore good that people are not unemployed for a long period of time for the government so that they do not need to pay so many benefits to these people and can contentrate on using these resources on other important aspects of the economy, such as education or health-care.

Costs to the economy

Having people unemployed is a waste of resources. If unemployment is high then there will be loss goods and services to enjoy and less tax revenue.

Workers on the Eiffel Tower