AS Macroeconomics - all you need to know about Unemployment

This covers types of unemployment, measures of unemployment, causes of unemployment, cures to unemployment and the effects of unemployment. Should be absolutely everything you need to know about this topic :)

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High employment is one of the Government's main macroeconomic objectives ­ as such the
topic of employment/unemployment comes up very frequently in exams. Here is all you
need to know about it.
Measuring Unemployment:
There are two main ways of measuring the number of people that are unemployed:
Claimant Count ­ the number of people who are registered for Job Seekers Allowance
meaning they have looked for work in the past two weeks and are able to start work in the
next two weeks.
Labour Force Survey ­ often gives a higher figure of unemployment than the Claimant Count
as it covers a wider range of unemployed people. It measures anyone who is between 16-65
and out of work as being unemployed, other than those in full time education. It also gives
information as to why people are unemployed.
Types of Unemployment
1) Real Wage Unemployment ­ this occurs when wages for jobs are set above the market
clearing level (the price level at which demand for labour and supply of labour are in
equilibrium). This means the number of people looking for jobs at that price level
outweighs the number of vacancies.
- Increased minimum wage
- Trade Union action that pushes up the wages in certain areas
- Create more jobs so supply equals demand, perhaps through government spending
on infrastructure
- Lower wages, or keep wages the same despite inflation which makes them
effectively decrease in value
- Limit Trade Union power
2) Demand Deficient/Cyclical Unemployment ­ involuntary unemployment due to lack of
demand in the economy. As labour is a derived demand a lack of Aggregate Demand
causes a lack of demand for workers.
- Economic recession
- Higher taxes, meaning people have less disposable income to spend

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Strong Pound, so higher demand for Imports and lower demand for Exports
- Higher Interest Rates
- Any other factor that lowers Aggregate Demand
- Putting demand back into the economy i.e. through lowering interest rates,
cutting taxes
- Increasing government spending
- Government subsidies for struggling businesses
3) Frictional Unemployment ­ when people move between jobs or from full time
education into jobs it may take time to find another vacancy
- Imperfect information in the labour market e.g.…read more

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Relocation grants ­ again the job vacancies may be there elsewhere in the
- Government subsidies to businesses so prices for certain industries can be more
5) Hidden Unemployment ­ people who may be interested in taking work but aren't
classified as being unemployed according to the Claimant Count as they don't receive Job
Seekers Allowance. They nay however claim other benefits
- Discouraged workers i.e.…read more



This is a 3 page summary of the key requirements on unemployment for AS level. It looks at the measures, types, consequences and remedies for unemployment.

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