Employment and Unemployment
                     EMPLOYMENT AND 
UNEMPLOYMENT
Employment
• The Labour Force Survey (LFS) defines an 
employed person as anyone aged 16, or over, 
who has completed at least one hour of work in 
the period being measured, or are temporarily 
away from his or her job, such as being on 
holiday.
Source: www.economicsonline.co.uk
Categories of employment
• Employees
• The self-employed
• Unpaid family workers
• Participants in government-funded training 
schemes
Source: www.economicsonline.co.uk
The employment rate
• The working age employment rate as the 
proportion of the working-age population who 
are in employment.
•  The working age population includes men aged 
16-64 and women aged 16-59.
Source: www.economicsonline.co.uk
Unemployment
• Unemployment is a term referring to individuals 
who are employable and actively seeking a job 
but are unable to find a job. 
• Included in this group are those people in the 
workforce who are working but do not have an 
appropriate job. 
Source: corporatefinanceinstitute.com
TYPES OF UNEMPLOYMENT
Demand deficient unemployment
• Demand deficit unemployment is the biggest 
cause of unemployment that typically happens 
during a recession. 
• When companies experience a reduction in the 
demand for their products or services, they 
respond by cutting back on their production, 
making it necessary to reduce their workforce 
within the organization. In effect, workers are laid 
off.
Source: corporatefinanceinstitute.com
Frictional unemployment
• Frictional unemployment refers to those workers 
who are in between jobs. 
• An example is a worker who recently quit or was 
fired and is looking for a job in an economy that is 
not experiencing a recession. 
Source: corporatefinanceinstitute.com
Structural unemployment
• Structural unemployment happens when the 
skills set of a worker does not match the skills 
demanded by the jobs available, or alternatively 
when workers are available but are unable to 
reach the geographical location of the jobs.
Source: corporatefinanceinstitute.com
Voluntary unemployment
• Voluntary unemployment happens when a 
worker decides to leave a job because it is no 
longer financially compelling. 
• An example is a worker whose take-home pay is 
less than his or her cost of living.
Source: corporatefinanceinstitute.com
Causes of Unemployment
• Unemployment is caused by various reasons that 
come from both the demand side, or employer, 
and the supply side, or the worker.
• Demand-side reductions may be caused by high 
interest rates, global recession, and financial 
crisis. From the supply side, frictional 
unemployment and structural employment play a 
great role.
Source: corporatefinanceinstitute.com
Effects of Unemployment
• The impact of unemployment can be felt by both 
the workers and the national economy and can 
cause a ripple effect.
• Unemployment causes workers to suffer financial 
hardship that impacts families, relationships, and 
communities. 
• When it happens, consumer spending, which is 
one of an economy’s key drivers of growth, goes 
down, leading to a recession or even a depression 
when left unaddressed.
Source: corporatefinanceinstitute.com