Nature of Unemployement


For any economy there are four major objectives. Full employment, price stability, high but sustainable rate of economic growth and keeping the balance of payments in equilibrium. Here we are only interested in unemployment objective regards to UK economy. Unemployment is   a state of an individual actively seeking for job but not having one. The unemployment rate is the proportion of the total labour force – the total of those employed and unemployed – currently out of work.
Cost or effect of unemployment to the economy
Unemployment is a serious policy problem for both economic and social reason. A human is   classed as a resource and its important that how this resource is being used otherwise it will be wasted. They should be deployed effectively in order to get maximum output. Waste of this resource can be expensive in regards to benefit system, loss of tax revenue and lesser contribution to GDP. Unemployment and GDP are interconnected. Greater employment result in to more people producing more out and adding to real GDP, at the same time lower employment means lesser people producing less output thereby reducing real GDP. As we mentioned before it could also have social problem too. Long term unemployment particular is also recognized to have significant psychological consequences, such as increased stress and low self-esteem.
                                      * Full employment is   a   situation in which all unemployment is frictional and structural, and cannot be reduced by increasing aggregate demand. Structural unemployment is that arises from a mismatch between the skills or location of existing job vacancies and the present skills or location of the unemployed; also known as mismatch unemployment. Frictional unemployment that arises because it takes time for workers to search for suitable jobs.also known as search unemployment. Since mid-1970s UK has experience a significant rise in the level of Unemployment. See graph Below:...