What is Employment and Unemployment?, How do we measure them?, The different types of them? and causes of them.
We will not look at the connections of how high unemployment can affect the economy.
1: Employment
Whether or not you are into economics, you should know what employment is, It is basically everyone who has jobs in the Economy there are several different employment types such as: Full time employment: Most full-time employment requires employees to work between 35 and 40 hours a week. Their working time is often divided amongst five days of the week with eight hours each day. ~ “uk.Indeed.com” Part time employment: Part-time work or a part-time job is a flexible work arrangement which means working less than full-time hours. It usually means working fewer days per working week and employees are normally considered to be part-time if they commonly work fewer than 30 hours per week. “spica.com” 0 Hour contracts: Zero-hours contracts are usually for ‘piece work’ or ‘on call’ work, for example for interpreters. This means: they are on call to work when you need them. you do not have to give them work. they do not have to do work when asked. “Gov.uk” Freelancers/Contractors: A freelancer is an independent contractor who earns wages on a per-job or per-task basis, typically for short-term work. Benefits of freelancing include the freedom to work from home or from a non-traditional workspace, a flexible work schedule, and a better work/life balance. “Investopedia” There are many more employment types but these are the 4 most popular ones.
2: Unemployment
Unemployment refers to the number of people who are looking for jobs but can’t find any due to the bad conditions in their industry such as Excess Labour, Redundancies, Low demand, Outdated industries, There are different types of unemployment such as: Cyclical Unemployment that occurs when the demand for goods fall low which means profits for a business fall that in turn lead to layoffs and cost cutting. Frictional Unemployment, this is the time needed for workers who have just left their job to find a new one, it usually doesn’t last long typically but sometimes it might if there are harsh economic conditions **Structural Unemployment **is a long term unemployment due to harsh conditions in the industry such as technological advancements that leave workers redundant, or where a worker is left unemployed because their skillset doesn’t match any need in the economy, Seasonal Unemployment is when people get unemployed at particular times of the year when demand in their industry is lower than other times, for example an ice cream truck won’t get much sales during christmas time or anytime cold. Classical Unemployment happens when wages are too high for the company to keep all it’s workers which results in unemployment. Other types of Unemployment, there are other types of unemployment that occur without a name, for example if an employee were to curse at his boss, unemployment could occur, and there are many more different circumstances.
3: Measuring Unemployment
How do we measure the level of unemployment, well different countries have different ways of doing it, why do we need to know this data?, It gives an important insight on how the economy is doing and a more in depth view on how individual industries are doing.
3.1) How unemployment is measured in the UK
In the UK, the ONF (Office for National Statistics) uses 2 methods of calculating the rate of unemployment in the UK, The Claimant Count and the Labour Force Survey, The Claimant Count: The simple idea of this concept is, when people are unemployed they will typically claim an Unemployment benefit, the way we measure unemployment is simply by counting the claims, the Pros of this is that the data is already there since when people claim, it get’s documented, and since the data is there, it is very cost effective and cheap, the Cons of this is that It overlooks the people who do not claim benefits, Many workers during Frictional unemployment do not usually claim benefits. The Labour Force Survey: the concept is that a survey about the individuals job status goes out to roughly 40,000 randomly selected houses every quarter through the royal mail mailing list, once selected you cannot refuse. This is the most commonly used way to measure unemployment in the UK, Pros, it is said to have produce a more fair view of the economy due to the randomness and it’s broad range and it doesn’t ignore any non benefit claiming citizen too, Cons, compared to the claimant count, it is significantly more expensive to run. there are more pros and cons but these are the only one’s we’ll discuss for now.
The sample is made up of approximately 40,000 responding UK households and 100,000 individuals per quarter. Respondents are interviewed for 5 successive waves at 3-monthly intervals and 20% of the sample is replaced every quarter. The LFS is intended to be representative of the entire population of the UK.
3.2) How unemployment is measured in the USA
The BLS (Bureau of Labor Statistics) have a quite different way of measuring unemployment, similar concepts but different terminology. U-3 Unemployment Rate: this is the official rate of unemployment used in the States, the concept is that a survey goes out to around 60,000 households and measures the employment statuses of the houses and see’s who is claiming benefits, the data of the benefit claiming is published every month, the Pros is that it measures the number of people who are jobless but actively seeking employment (or so it claims), the Cons is that economists tend to hate it as they say it is far too simple due to it’s ignorance of the Bigger Picture, it ignores those who want full time employment but can only get part time due to lack of jobs, it over looks those who can get employed but just want a small break, and the worst of all, it is Laggy, the rate only changes months after the economy changes,
It moves higher when an economy experiences hardships and moves lower when the economy strengthens. ~ “Investopedia”
For example, unemployment rates spiked dramatically in 2020 due to the wide-ranging economic impact of the COVID-19 pandemic. But the unemployment situation was very different two years later. Total nonfarm payroll employment rose by 678,000 in February 2022, and the unemployment rate edged down to 3.7%. ~ “Investopedia”
U-6 Unemployment Rate: After the U-3, this is the next favourite, many suggest that this is a better way to measure unemployment, the concept is that, like the U-3, a survey goes out to around 60,000 households and measures the employment statuses of the houses and see’s who is claiming benefits, But, the difference is that, it also looks at the UnderEmployed too, the underEmployed are people who wanted full-time jobs but due to the economic conditions, they were forced to work in a Part time job, the U-3 marks these people as employed, whereas the U-6 marks them as unemployed, the U-3 also ignores those who have given up looking for jobs too unlike the U-6
Gallup (data analytics firm) notes that an engineer or any other skilled professional who takes a low-paying part-time job to survive would not be counted in the official unemployment rate, even if they make as little as $20 a week.
There are other rates in the USA such as:
- U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force
- U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force
- U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers
- U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force
3.3) EU
A survey is sent out to households (EU-LFS — EU Labour Force Survey), it aims to classify the people (above the age of 15) into Three categories, employed, unemployed, outside the labour force.
Variables Involved: Typology to classify the statistical information:
- Total Population In private households: 1.1) Demographic and geographical Variables 1.2) household composition
- Population aged 15 years and above 2.1) Labour status 2.2) Citizen And country of birth 2.3) education and training 2.4) self perceived main status
- Employed 3.1) Employment characteristics of the main job 3.2) Hours worked 3.3) Second Job 3.4) Income 3.5) Atypical Work 3.6) Form of employment
- Unemployed 4.1) Previous work Experience 4.2) Methods used to find a job 4.3) Duration of search
- Outside the labour force 5.1) Previous work experience 5.2) searching but not being available or not searching but being available to work 5.3) Reason for not working, not searching or not being able to work
The Definitions of the Terms: Employed: people aged 15–89 who worked during the reference week, even for just one hour, for pay, profit or family gain / people who did not work, but had a job or business from which they were temporarily absent during the reference week, Unemployed: Unemployed people are those aged 15–74 who were not employed during the reference week but were available for work, and were either actively seeking work in the 4 weeks before the reference week or had already found a job to start within the next 3 months. Not in the Labour Force: People who fall into neither of the above categories
Most of the information regarding EU was from the Eurostat website Methodology — Eurostat (europa.eu)
4) What Causes unemployment?
Well several things could lead to unemployment such as: Changes in technology: changes in tech could lead to industries getting outdated and moving to new ones, if workers can’t ‘jump the ship’ then their skills won’t be needed anymore leading to unemployment, Decrease in the supply of labour: When there is less labour supply, it increases the value of a labourer, which then pushes wages up, and a company can only afford a certain budget, which then leads to layoffs Specialisation in Countries: When a country specialises, it becomes better in that industry and makes it hard for other countries to compete, and those other countries may experience unemployment in those industries The list goes on, this is already quite a large article haha, Let’s wrap it up here.
The End
And that’s a wrap!, This is by far the Largest article that i’ve written about as of April 2024, I must admit I was contemplating on whether or not to include the EU but I did, I thank you if you’ve read it, I hope it has helped you learn or revise something, any corrections / improvements that i should make, please drop them in the comment, Once again, Thank you :), ස්තුතියි මිත්රයා, පරිස්සම් වෙන්න Thank you my friend, take care