Unemployment

By: EconomyWatch   Date: 14 October 2010

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Unemployment is a status in which individuals are without job and are seeking a job. It is one of the most pressing problems of any economy especially the underdeveloped ones.This has macroeconomic implications too some of which are discussed below.

Reduction In The Output

The unemployed workforce could be utilized for the production of goods and services. Since they are not doing so, the economy is losing out on its output.

Reduction In Tax Revenue

Since income tax is an important part of the revenue for the government. The unemployed are unable to earn, the government loses out on the income tax revenue.

Rise In The Government Expenditure

The government has to give unemployment insurance benefits to the claimants. Hence the government will lose from both sides in terms of unemployment benefits and loss of tax revenue.

Types of Unemployment

Cyclical Unemployment: This type of unemployment is consistent with the trade cycle. When the economy is in its boom phase, there is a reduction in the unemployment. Conversely, when it passes through the recessionary phase, unemployment rate rises.

Seasonal unemployment: This type of unemployment is most common in hotel, catering or fruit picking business.

Frictional unemployment: Frictional unemployment occurs when an individual is between two jobs, i.e. he has lost one job and is searching for the other.

Structural Unemployment: Structural employment occurs due to a change in the composition of some industries. Technological progress may make an industry capital intensive from a purely labor intensive one. The release in labor from such an industry gives rise to the problem of unemployment.

Different procedures are adopted to measure unemployment. One is the number of unemployed individuals who have registered themselves in the employment agencies or have claimed unemployment benefits. This measure suffers from the problem of double counting. Again there may be individuals who have neither registered themselves in the employment agencies nor claimed unemployment benefits and still is unemployed.

The second measure of unemployment is taking a sample of households. This measure, although suffers from sampling errors, is the most widely used one.

Find out more about Unemployment on EconomyWatch below and check out our Economics Database for World Unemployment Rate Statistics.

 


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