Unemployment, Put Simply

Economics terms are thrown about by those in-the-know all too regularly. Frankly, it’s baffling for those of us without expert knowledge in the subject, and “put simply” explanations are infrequent, to say the least. #LetsTalkPolitics and challenge this.

Unemployment can simply be defined as “when someone who is ready, willing and available to work at the going wage rate but is unable to find a job”. It is measured by the claimant count, a system which shows which members of society are claiming the job seekers allowance (JSA) at one time. As well as this, unemployment can be measured via the labour force survey, which counts those who haven’t had a part-time or full-time job in the past month. The labour force survey is often not credited, due to the fact of sampling errors that may take place in the survey.

There are various causes of unemployment in the economy; here are the central and most dominant of them all:

Frictional Unemployment

Frictional unemployment is a type of unemployment caused by ‘movement’ between specific jobs, e.g. a waiter becoming a sales assistant at a shop. Frictional unemployment, unlike others, is often unavoidable – a certain level of frictional unemployment is to an extent desirable as free movement of labour in an economy is key for sustainability.

Structural Unemployment

Structural unemployment happens when there is a long-run decline in demand for certain goods or services in an industry, which leads to fewer jobs being in demand overall e.g. Less demand for domestic coal in the UK, Coal workers lose jobs. Hence the skills obtained by the coal workers become worthless in the economy. This can centrally be caused by competitive demand for cheaper alternatives abroad.

Cyclical Unemployment

Cyclical unemployment or demand-deficient unemployment is involuntary employment due to not enough demand for goods and services in the domestic economy. Cyclical unemployment can increase largely in a recession or slump. When a recession occurs, firms are making less profit/revenue overall as there is less demand and hence this will lead to unemployment of workers. This is a large problem for economies with persistent recessions that can’t seem to climb out due to this unemployment cycle.

Seasonal Unemployment

Unemployment caused by changes in seasonal work. E.g. Working at a summer camp, or an ice rink in the winter. These are usually only temporary forms of employment.

 

The UK Unemployment rate remained at an 11 year low of 4.8% in the three months to November of 2016 (ONS). It seems the UK is currently experiencing very low unemployment which is very beneficial to the economy. However, is the fact that unemployment is so low due to temporary jobs and zero hour contracts and is this right for our economic and social growth?

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