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GROUP MEMBERS:-•AVANEL McKENZIE•BRI-ANN JORDAN•KEZRON HECTOR
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OBJECTIVES
• To evaluate the cost of unemployment
• To evaluate the policies used to reduce unemployment
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WHAT IS UNEMPLOYMENT?
• Unemployment is defined as a situation where someone of working age is not able to get a job but would like to be in full time employment.
• The most frequently cited measure of unemployment is the unemployment rate. This is the number of unemployed persons divided by the number of people in the labour force.
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COST OF UNEMPLOYMENT
• Lost Output – the cost to the economy in terms of waste or unused resources.
• Increased Benefit Payments – governments are forced to utilized their limited resources to fund relief programs and help reduce unemployment.
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• Lost Tax Revenue – when individuals become unemployed they no longer pay income tax.
• Human Costs Of Unemployment – workers who are unemployed for a great amount of time tend to be negatively affected because their skills become obsolete.
COST OF UNEMPLOYMENT
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CAUSES OF UNEMPLOYMENT
• Frictional/Transitional Unemployment – this arises as a result of people changing jobs from time to time. In addition if the skills of the labour force do not match the labour needs of the market.
• Casual/Seasonal Unemployment – this arises as a result of the changes in the employment needs of certain industries due to seasonal patterns in consumer demand in various markets.
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• Structural Unemployment – the mismatch between the existing skills based of the labour force and the needs of the labour market.
• Keynesian/Cyclical Unemployment – Cyclical (Keynesian) unemployment is caused by downturns in the economy that are part of the business cycle. The business cycle is the natural fluctuations in the economy.
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Classical/Real Wage Unemployment - This is unemployment that is caused by the real wage being higher than the equilibrium
real wage.
This occurs when wages are artificially kept above the equilibrium.
For example, powerful trades unions or minimum wages could lead to wages above the equilibrium leading to excess supply of labour (this assumes labour markets are
competitive)
