Types of unemployment

Cyclical unemployment Is closely correlated to the business economic

cycle where when the economy goes to recession the unemployment rates
increase and vise-versa.

AD - aggregate
demand (AD) is the total demand for final goods and services in an economy at
a given time. It specifies the amounts of goods and services that will be
purchased at all possible price levels.
Structural unemployment- Structural unemployment occurs when certain
industries decline because of long term changes in market conditions. For
example, over the last 20 years UK motor vehicle production has declined while
car production in the Far East has increased, creating structurally unemployed
car workers. Globalisation is an increasingly significant cause of structural
unemployment in many countries.
Seasonal unemployment - Seasonal unemployment exists because certain
industries only produce or distribute their products at certain times of the year.
Industries where seasonal unemployment is common include farming, tourism,
and construction.
Frictional unemployment
Frictional unemployment - also called search unemployment, occurs when
workers lose their current job and are in the process of finding another one.
There may be little that can be done to reduce this type of unemployment, other
than provide better information to reduce the search time. This suggests that full
employment is impossible at any one time because some workers will always be
in the process of changing jobs.

Voluntary unemployment - Voluntary unemployment is defined as a situation

when workers choose not to work at the current equilibrium wage rate. For one
reason or another, workers may elect not to participate in the labour market.
There are several reasons for the existence of voluntary unemployment including
excessively generous welfare benefits and high rates of income tax. Voluntary
unemployment is likely to occur when the equilibrium wage rate is below the
wage necessary to encourage individuals to supply their labour.
Factors of production: the resources needed to produce goods or services.
-

Land: is all the natural resources such as minerals, ores, fields, oil and
forests
Labour: is the number of people available to work
Capital: is machinery, equipment and finance needed for production of
goods and services\
Enterprise: is the people prepared to take on risk of setting up
businesses they are known as entrepreneurs
Productivity Formula:

Business classifications:
-

Primary sector: This business activity involves extracting or harvesting

natural resources from the land or sea, an example of the activity would
be: Farming, fishing, forestry and mining
Secondary sector: This is businesss activity is to produce raw materials
into finished goods, an example would be refining, manufacturing and
construction
Tertiary sector: This business involves supplying services to the final
consumer or business an example of this would be: shops, cinema, banks,
airlines basically retailing, finance entertainment and/or transport

How to increase productivity:

Making the most of employee time

One of the ways business productivity can be increased is by maximising the

use of employee time. Very often, workers find themselves away from the
office or their normal workstation - whether away at meetings, travelling
between sites or at home. By finding ways to support productive work during
this 'dead' time, businesses can ensure more gets done and output increases.
The use of mobile technology solutions - such as smartphones and media
tablets - can help in this respect, by guaranteeing workers are never more
than a few clicks away from important files and documents. Where employees
have access to smart, connected devices, they can carry on working
regardless of their location, ensuring more time is available for value-adding
tasks.
Ensuring employee wellbeing
SMB employees are also likely to be more productive if they are fit, healthy
and motivated to give their all on a daily basis. Workers need to rest and
recuperate between shifts, switching off from their employment tasks in the
evenings and on weekends where possible.
This ensures that when they come into work, they are ready to work hard and
perform to the best of their ability. If employees work too many hours and fail
to maintain a healthy work-life balance, they run the risk of burn-out something which may see them be less productive in the office. They may
also lose the motivation to dedicate themselves to their work, and
consequently engagement with their employer.

Geographical immobility
Geographical immobility occurs when workers are not willing or able to move
from region to region, or town to town. Geographical mobility is made worse by
immense house prices variation between regions, for example workers in
Yorkshire to sell their home and buy an equivalent one in London.
Other factors also contribute to geographical immobility such as
-

Strong social and family ties.

Parents being unwilling to disrupt their childrens education by changing

schools.

Stresses of moving home can also be a deterrent to mobility for some.

Industrial immobility
Industrial immobility occurs when workers do not move between industries, such
as moving from employment in motor industry to employment in the insurance
industry. Industrial immobility has affected the UK, and many other industrial
countries, as the growth of service industries, and the decline of manufacturing
industries, has increased the need for mobility.

Occupational immobility
Occupational immobility occurs when workers find it difficult to change jobs
within an industry. For example, it may be very difficult for a doctor to retrain to
be a dentist.
Industrial and occupation immobility are most likely to happen when skills are
not transferable between industry and job.
Information failure also contributes to labour immobility because workers may be
immobile because they do not know where all the suitable jobs for them are.

A resulting problem with labour market immobility is that it can create regional
unemployment, which is a type of structural unemployment. This means that a
change in the structure of industry leaves some people unable to respond by
changing job, industry, or location and as a result, they remain temporarily or
permanently unemployed.
Immobility can also lead to rising labour costs, as firms have to increase wages
to encourage workers to re-locate.
Each working person is guaranteed a minimum wage for work in the UK. It is
illegal for an employer to pay a figure below this. The minimum wage is different
for under 21s and over 21s.

ADVANTAGES OF THE MINIMUM WAGE

- Fair for workers to be paid a minimum wage.
- Helps low earners gain a higher standard of living
- Extra disposable income should lead to extra spending in the economy
- Helps increase the gap between wages for low earners and unemployment
benefit
- May help reduce unemployment
DISADVANTAGES OF THE MINIMUM WAGE
- Increases the cost to businesses
-Businesses may increase their prices (cost push inflation)
- Businesses may be unable to afford to employ as many workers
- Could cause unemployment
- Other workers may now ask for a pay rise
- Doesnt help the unemployed who dont receive a wage

In the diagram above, 3.80 is the free market equilibrium wage, supply is equal to demand. At this
point 1000 people are employed.
Imagine that a minimum wage is imposed at 4.20. Some businesses cant afford their wage bill and
reduce their workforce. Now only 750 workers are employed. 250 have become unemployed.