Employment and Unemployment

Summary

Employment refers to the engagement of a person in the labour force in some occupation, while unemployment is when individuals are not in paid employment but are available for work. Full employment is a situation where there is no cyclical unemployment, though other types may exist.

• Employment — engagement of a person in the labour force in some occupation. Example: A teacher working in a school.
• Unemployment — persons not in paid employment but available for work. Example: A person actively seeking a job but not currently employed.
• Full Employment — no cyclical unemployment, though structural and frictional may remain. Example: An economy where everyone who wants a job can find one, except for those in transition or with skill mismatches.
• Labour Force — all those who work for gain, including the unemployed seeking work. Example: Employees, employers, and job seekers.
• Dependent Population — people not in the labour force relying on it for goods and services. Example: Retired individuals and students.
• Participation Rate — the number of people employed or seeking employment. Example: The percentage of the working-age population that is either employed or actively looking for work.

Exam Tips

Key Definitions to Remember

• Employment
• Unemployment
• Full Employment
• Labour Force
• Dependent Population
• Participation Rate

Common Confusions

• Confusing cyclical unemployment with structural unemployment
• Misunderstanding the difference between the labour force and the dependent population

Typical Exam Questions

• What is the definition of unemployment? Unemployment is when individuals are not in paid employment but are available for work.
• How is the unemployment rate measured? It is the number of unemployed people divided by the total number of people in the labour force.
• What are the consequences of high unemployment? High unemployment can lead to poverty, reduced living standards, and increased crime rates.

What Examiners Usually Test

• Understanding of different types of unemployment
• Ability to explain the consequences of unemployment
• Knowledge of policies to reduce unemployment