This page looks at unemployment, specifically a definition of unemployment, how it is calculated and the social and economic costs of unemployment.
How do we classify a person as unemployed and how is unemployment measured. What are the consequences for unemployment for the individual and the economy.
Lesson time: 90 minutes
Define the term unemployment and explain how the unemployment rate is calculated.
Explain the difficulties in measuring unemployment, including the existence of hidden unemployment, the existence of underemployment, and the fact that it is an average and therefore ignores regional, ethnic, age and gender disparities.
Discuss possible economic consequences of unemployment, including a loss of GDP, loss of tax revenue, increased cost of unemployment benefits, loss of income for individuals, and greater disparities in the distribution of income.
Discuss possible personal and social consequences of unemployment, including increased crime rates, increased stress levels, increased indebtedness, homelessness and family breakdown.
Evaluate the relative success of the following nations for the year 2016:
|GDP per capita ($)||Unemployment rate (%)||Inflation (%)||Net trade (as a % of GDP)|
The four countries listed are Denmark, Kenya, Turkey and Jordan - which is which?
Economically active population - defined as a person who is actively seeking work and within the working age (18 – 65), not in full time education and declared physically fit to work. This is sometimes called the Labour force or the working population.
Unemployment rate - the number of economically active people in the economy without paid employment.
Hidden unemployment - this includes individuals who have given up looking for work as they fear they have no chance of being successful. It also contains some part-time workers who are seeking full time work as well as many overqualified people e.g. university graduates working in jobs where no education is required. This is also referred to as underemployment.
Economic costs of unemployment - the gap between national output when the economy is in recession and the output level when the economy is at full employment, i.e. the size of the recessionary gap. Examples include the fall in tax revenues and consumption, when workers are laid off and the costs of the government making additional transfer payments to those households on low incomes or without work.
Social costs of unemployment - examples include a loss of income and fall in living standards. This impacts on the unemployed worker's family as well as the individual. If the period without work becomes long term then the unemployed person may suffer from a loss of self-esteem, motivation, depression and potential mental illness.
Unemployment (out of work) payments - payments made by some governments to the unemployed, which can negate some of the financial loss to the family when a person loses their job.
The activities on this page are available as a class handout at: Unemployment
Activity 2: What is unemployment?
Start by watching the following short video and then complete the questions that follow:
(a) Explain which of the following people would be included in the nation's unemployment rate:
- a housewife who wishes to work but not currently employed
- a part time worker seeking full time employment
- a student at college looking for a part-time job to supplement their studies
- a worker of 55 - 60 who voluntary retires.
(b) Why does the above make it difficult for nations to accurately calculate unemployment and why is it also sometimes difficult to compare unemployment rates between different nations?
Activity 3: The real rate of unemployment
Watch the following video and then answer the question: why is the official rate of unemployment lower than the number of people unemployed?
Activity 4: Distribution of unemployment
The map to the right illustrates the distribution of unemployment rates in the UK, where national unemployment stands at just 4%. However, this ranges from almost zero in some areas to nearly 30% in others.
(a) Explain the challenges this presents for the nation?
(b) Which policies might the UK employ to reduce some of the regional disparities in employment.
Activity 5: A focus on youth unemployment
The diagram on the right shows the impact of a minimum wage on youth unemployment in a country. Which unemployment type are those workers unable to find work?
To what extent would a government be advised to remove the minimum wage as a way of reducing unemployment levels?
Activity 6: A focus on middle and old age unemployment
The following video highlights a growing problem in many Developed nations, where a changing society and some might argue youth obsessed culture has meant an increasing numbers of experienced, highly qualified workers find themselves either unemployed or underemployed.
(a) How does this video highlight some of the difficulties faced by experienced and sometimes well qualified workers in the US?
(b) Identify the difference between unemployment and underemployment.
Activity 7: The costs of unemployment
Watch the following video on the social and economic costs of unemployment and then answer the questions that follow.
(a) Using a suitable diagram illustrate the economic costs of unemployment to the Spanish economy.
(b) Describe some of the social costs of unemployment.
Research the nations with the highest unemployment rate in the world. The answer is on the following presentation but remember that the following relates only to the 'official rate of unemployment' and this may not be the same as the 'real rate of unemployment'. Are 95% of Zimbabwean workers really unemployed?
Can be accessed at: Who is unemployed?