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Table of Contents

  1. Topic pack - Macroeconomics - introduction
  2. 2.1 The level of overall economic activity (notes)
  3. 2.1 The level of overall economic activity (questions)
  4. Section 2.2 Aggregate demand and supply (notes)
  5. Section 2.2 Aggregate demand and supply (simulations and activities)
  6. 2.2 Aggregate Demand and Aggregate Supply (questions)
  7. 2.3 Macroeconomic objectives (notes)
  8. Low Unemployment
    1. Low Unemployment
    2. What the data says
    3. The meaning of unemployment
    4. Case study - regional variation
    5. Consequences of unemployment
    6. Case study - tougher for men
    7. Types and causes of unemployment
    8. Disequilibrium unemployment
    9. Equilibrium unemployment
    10. Policies to reduce unemployment
    11. Low and stable inflation
    12. Low and stable inflation (notes)
    13. The meaning and measurement of inflation
    14. A consumer price index
    15. Finding out more about consumer price index weights
    16. Problems with measuring inflation
    17. Inflation - videos
    18. Consequences of inflation
    19. Hyperinflation
    20. The consequences of deflation
    21. Types and causes of inflation: demand-pull inflation
    22. Types and causes of inflation: cost-push inflation
    23. Case Study - car prices in Trinidad
    24. Possible relationships between unemployment and inflation
    25. PlotIT - Phillips curve
    26. Phillips curve - long-run
    27. Natural rate of unemployment
    28. NAIRU
    29. Economic growth
    30. Economic growth (notes)
    31. Causes of economic growth
    32. Economic growth and the PPF (1)
    33. Economic growth and the PPF (2)
    34. Economic growth and the business cycle
    35. Economic growth and the aggregate supply curve
    36. Consequences of economic growth
    37. Equity in the distribution of income
    38. Equity in the distribution of income (notes)
    39. Indicators of income equity
    40. Poverty
    41. The poverty line: An Indicator of Relative poverty
    42. The causes of poverty
    43. The role of taxation in promoting equity
    44. The role of taxation in promoting equity (notes)
    45. Other methods of promoting equity
  9. 2.3 Macroeconomic objectives (questions)
  10. 2.4 Fiscal policy (notes)
  11. 2.4 Fiscal policy (questions)
  12. 2.5 Monetary policy (notes)
  13. 2.5 Monetary Policy (questions)
  14. Section 2.6 Supply-side policies (notes)
  15. 2.6 Supply-side policies (questions)
  16. Print View

Types and causes of unemployment

Syllabus: Describe, using examples, the meaning of
  • frictional,
  • structural,
  • seasonal and
  • cyclical (demand-deficient)

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Syllabus: Distinguish between the causes of
  • frictional,
  • structural,
  • seasonal and
  • cyclical (demand-deficient)

Additional Notes and Amendments

Frictional Unemployment: Frictional Unemployment is caused by the imperfect working of the labour market. When a person loses (or quits) a job they need time to research other job opportunities, go through application procedures and prepare themselves for the new job - this all takes time and it could be weeks or even months. During this time the person is counted as unemployed. This time can be significantly reduced by making relevant information about job opportunities easier to find eg Job Centres in UK, Employment Bureaus advertising facilities etc. Frictional unemployment can be geographic or occupational but is short term.

Seasonal Unemployment: Seasonal unemployment deserves its own category and is better not lumped in with Frictional Unemployment. It does have fewer problems than the other unemployment types since it is reasonably predictable. Ski Resorts and Beach Resorts are examples.

Structural Unemployment:

using a diagram, that structural unemployment is caused by changes in the demand for particular labour skills, changes in the geographical location of industries, and labour market rigidities.
Over time Demand patterns and economies change. This means in adjusting to these changes the nature of Goods and Services produced by economies (especially in the developed world) changes. In industries and areas that once were strong in the production processes you can see a decline and this leads to structural unemployment. Structural unemployment can be Geographic and/or Occupational and is a major cause of long term unemployment. In fact you could see structural unemployment as a long term version of frictional unemployment. Structural unemployment was a significant factor in the large scale unemployment problems of UK, Europe and USA as so-called heavy-industries (Steel and Shipbuilding) moved to where labour was cheaper (Japan and other Asian countries) and extractive industries (especially coal) declined as other forms of energy sources (Nuclear, Hydro-electric) became more efficient. Therefore geographically, areas in UK such as North-East (Shipbuilding), Lancashire and Yorkshire (mining) became desolate, high-unemployment areas.At the same time even if people were prepared to move areas they tended to have massively different skill-sets to those needed. A coal miner becoming a software engineer was usually not a realistic retraining programme. Therefore occupational unemployment was rife too. Finally, structural unemployment can be caused by sticky wages (rigid meaning inflexible) in goods and services: Trade Union inflexibility and minimum wage laws are examples - see Price Floors in Microeconomics.

Cyclical Unemployment:

Syllabus: Explain, using a diagram, that cyclical unemployment is caused by a fall in aggregate demand.
This can be confusing since it conjoins unemployment caused by low demand (remember the demand for labour is a derived demand) due to the natural operations of the business cycle (see Page 33)
and low demand for other reasons: It is better to think of this as Demand Deficient unemployment as this label says it all. While the business cycle can be an underlying cause another reason for demand deficient unemployment is government policy aimed at reducing inflation whereby aggregate demand is reduced. You can use the business cycle diagram to explain this and/or the AS/AD deflationary gap diagram (see Page 58). An example of demand deficient unemployment is the high unemployment figures following the credit crash of 2008.

Syllabus: Evaluate government policies to deal with the different types of unemployment.

Please see the sections on Fiscal and Monetary Policies for this but do not forget the policies suggested above and in the Micro Section.