#efining unemployment$
• Someone who does not have a job and is willing and available for work at the going rate.
• Unemployment rate is expressed as a percentage of the labour force. 
 
Loss of earnings.
&elf'esteem and "ealt" problems$
(amily brea%down$
practices and tec"nology$
 The opportunity cost of unemployment.
•  *ost output
 The reverse multiplier e!ect.
• Unemployed spend less
 
+$ )"e claimant count , people receiving -obsee%ers llowance
.$ mont"ly survey of "ouse"olds , t"e *abour (orce &urvey in t"e U/
)"e *abour (orce &urvey places adults into one of t"ree categories:
a$ Employed
b$ Unemployed
*abour (orce
 
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Unemployment ;ate 6 1.$4.<7.$872 = +44 6 8$.>
 
 
• (ull time students
up loo%ing for obs
0ot all unemployed benefits claimants are
actively loo%ing for wor%
 
Most spells of unemployment
Hysteresis , t"e longer people
are unemployed3 t"e more
unemployed
 
unemployment t"at persists even in t"e long
run$
economy normally experiences$
natural rate$
of t"e business cycle$
!"y is t"ere always some unemployment?
It ta%es time for wor%ers to searc" for t"e obs
t"at best suit t"eir tastes and s%ills$
Frictional unemployment   - unemployment t"at
results from t"e time t"at it ta%es to matc"
Dualified individuals wit" appropriate obs$
 
(rictional unemployment is inevitable because
economies c"ange constantly$
sectoral s"ifts. 
It ta%es time for wor%ers to searc" for and find
 obs in new sectors$
overnment programmes can affect t"e time it
ta%es unemployed wor%ers to find new obs$
)"ese programmes include:
• overnment'run employment agencies
• ublic training provision
overnment'run employment agencies give
ublicly'funded training aims to ease t"e
transition of wor%ers from declining to growing
industries and to "elp disadvantaged groups
escape poverty$
Unemployment insurance partially protects
unemployed$
• educes t"e searc" efforts of t"e unemployed$
• !ay improve t"e c"ances of wor%ers being
matc"ed wit" t"e rig"t obs
 
Structural unemployment - occurs w"en t"e
Duantity of labour supplied exceeds t"e
Duantity demanded$
explain longer spells of unemployment$
!"y is t"ere structural unemployment?
$ Minimum wage laws
"uantity o# 
eDuilibrium wage:
• Unemployment inevitably results$
"uantity o# 
• Improve motivation
• ;educe absenteeism
• *abour turnover?
"uantity o# 
wit" employers over wages and wor%ing
conditions$
In t"e early +9G4s over "alf of t"e U/ labour
force was unionied but t"is figure fell rapidly
over a few years to .7$G> in .4++$
Union density is "ig"er in most EU countries$
 
on t"e terms of employment is called
collective bargaining.
employer cannot reac" an agreement$
 
of firms
on employers
of outsiders
paid by firms in order to increase wor%er
productivity$
above t"e eDuilibrium level$
 
time$
is attributable to a few people w"o are
unemployed for long periods of time$
& ne reason for unemployment is t"e time it
ta%es for wor%ers to searc" for obs t"at best suit
t"eir tastes and s%ills$
 
some unemployment is minimum wage laws$
( Minimum wage laws raise t"e Duantity of labour
supplied and reduce t"e Duantity demanded$
)   t"ird reason for unemployment is t"e mar%et
power of unions$
t"e t"eory of efficiency wages$
+ Hig" wages can improve wor%er "ealt"3 lower
wor%er turnover3 increase wor%er effort3 and raise
wor%er Duality$
t"e individual and for society$