Economics · Government and the macroeconomy. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.
The labour force is everyone who has a job plus everyone who is unemployed. A person is unemployed only if they are without a job, willing and able to work, and actively looking for one. Students, retired people and full-time carers who are not looking for work are outside the labour force.
Unemployment has four causes: frictional (between jobs), structural (skills no longer wanted, or jobs in the wrong place), cyclical (too little total demand) and seasonal.
Unemployment wastes resources: output is lost, tax revenue falls and benefit spending rises. The right policy depends on the type. Demand policies suit cyclical unemployment; training and information suit structural and frictional.
Students divide the number unemployed by the whole population or by the number employed. Always divide by the labour force, which is employed plus unemployed.
Answer: The unemployment rate is 5% (the population of 50 million is not used).
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