What is unemployment?

The unemployed are those able and willing to work but cannot find a job despite searching for work. Unemployment means that human resources are not being used to produce goods and services to meet people’s needs and wants.

Measurement

Unemployment is measured in two main ways:

Claimant count:

Includes people who are eligible to claim Job Seekers Allowance (JSA). However it excludes people who don’t meet all criteria even though they may actively seek work e.g. people on government schemes.

Labour Force Survey:

Undertaken by the International Labour Organisation (ILO) the LFS Includes those who have looked for work in the past month and are able to start work in the next two weeks.

Types of Unemployment

Demand deficient / Cyclical / Involuntary unemployment

Demand deficient unemployment arises in a recession in the economic cycle due to a lack of aggregate demand. In recession people spend less on consumer goods so firms reduce production of goods. Firms therefore employ fewer workers or in extreme circumstances, lay off workers.


Structural unemployment

This occurs when there is a mismatch between the characteristics of unemployed workers and the requirements of jobs.

Structural unemployment is caused by immobility of labour:

Occupational immobility: Lack of transferable skills, preventing workers from moving from one job to another.

Geographical immobility: Prevents workers moving from one area to another, to fill vacancies.

Frictional unemployment

This is a form of voluntary unemployment caused by people moving in between jobs or searching for jobs. Recent university graduates are a good example. It takes time for people to find jobs at wage rates they are prepared to accept.

Is unemployment measured accurately?

1) Economically Inactive

People who do not actively seek work are not included in unemployment statistics.

Those not seeking work may include:

Stay at home parents

Retired / Elderly

Disabled people

2) Data limitations

Unemployment data recognises some groups as unemployed despite seeking or in some cases being in work. For example people on scheme's that provide training and employment are not included in employment statistics.


3) Under-employment

Unemployment data takes little account of under employment. An example would be people willing and able to work full-time jobs but only work part-time hours.