Unemployment and the Labour Force: Their Affect on the Economy
Unemployment and the Labour Force:
Their Affect On the Economy
This essay looks at how the level of unemployment (or employment) and labour force participation affect the economy as a whole.
For the purpose of this essay I will concentrate more on unemployment, as this adversely affects the size of the labour force, whereas labour force participation does not affect the level of unemployment in the same manner. In reality, the two work hand in hand and it is vital that they both retain an aspect of stability for a successful economy.
From a macroeconomic perspective, we can first look at the following equation:
AE = C + I + G + X –M
With the letters meaning Aggregate Expenditure, Consumption, Investment, Exports, and Imports respectively (Samuelson and Nordhaus, 1995).
Assuming that the country runs in a ‘normal’ fashion being affected by the business cycle and fiscal and monetary policy, we can look at the fact that a high level of unemployment is going the dramatically affect national output, and also affect all of the before mentioned factors in the equation above due to knock on effects. This being said, we can examine how unemployment arises and the word itself in a more analytical fashion.
Unemployment Defined
The ‘Collins Dictionary of Economics’ (Pass, 2000) defines unemployment as:
‘Inability to obtain a job when one is willing or able to work. According to Sloman and Suctchliffe, (2001) this can be measured in two ways: official registration with a state agency, which carries some form of income support, and self-assessment by a random sample of the population…’
This is the most basic part of the definition, but is enough for us to understand and evaluate the topic at hand.
The Labour Force Survey
The ‘Labour Force Survey’ is the primary method used when obtaining national statistics on unemployment. According to Bosworth, Dawkins, and Stromback, (1996) the Survey divides the population into two groups. These are:
Their Affect On the Economy
This essay looks at how the level of unemployment (or employment) and labour force participation affect the economy as a whole.
For the purpose of this essay I will concentrate more on unemployment, as this adversely affects the size of the labour force, whereas labour force participation does not affect the level of unemployment in the same manner. In reality, the two work hand in hand and it is vital that they both retain an aspect of stability for a successful economy.
From a macroeconomic perspective, we can first look at the following equation:
AE = C + I + G + X –M
With the letters meaning Aggregate Expenditure, Consumption, Investment, Exports, and Imports respectively (Samuelson and Nordhaus, 1995).
Assuming that the country runs in a ‘normal’ fashion being affected by the business cycle and fiscal and monetary policy, we can look at the fact that a high level of unemployment is going the dramatically affect national output, and also affect all of the before mentioned factors in the equation above due to knock on effects. This being said, we can examine how unemployment arises and the word itself in a more analytical fashion.
Unemployment Defined
The ‘Collins Dictionary of Economics’ (Pass, 2000) defines unemployment as:
‘Inability to obtain a job when one is willing or able to work. According to Sloman and Suctchliffe, (2001) this can be measured in two ways: official registration with a state agency, which carries some form of income support, and self-assessment by a random sample of the population…’
This is the most basic part of the definition, but is enough for us to understand and evaluate the topic at hand.
The Labour Force Survey
The ‘Labour Force Survey’ is the primary method used when obtaining national statistics on unemployment. According to Bosworth, Dawkins, and Stromback, (1996) the Survey divides the population into two groups. These are:
References: Blundell, R. and Walker, J. (1986), Unemployment Search and Labour Supply, Cambridge: The University Press. Bosworth, D. Dawkins, P and Stromback, T. (1996), The Economics of the Labour Market, Harlow: Longman. Ison, S. (2000) Economics, 3rd ed. Harlow: Prentice Hall. Pass, C. L. (2000) Collins Dictionary of Economics, 3rd ed. London: Collins. Parkin, M. Powell, M. and Kent, M. (2003), Economics, Harlow: Addison-Wessley Greenhalgh, C Mallier, T. and Shafto, T. (1989), Economics of Labour Market and Management, London: Hotchinson. Samuelson, P. A. and Nordhaus, W. D. (1995), Economics, 15th ed. London: McGraw Hill. Sloman, J. and Suctchliffe, M. (2001), Economics for Business, 2th ed. Harlow: Financial Times Prentice Hall. Kamarck, A. M. (1998) Economics and the Real World. Oxford: Basil Blackwell Publisher Limited. Parkin, M. Powell, M. and Kent, M. (2003), Economics, Harlow: Addison-Wessley