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Level 2 Business and Economics: The Economic Context of Business

Employment and Unemployment

• The population of working age refers to the number of people available for work and includes all those aged between 16 and 65.
• The level of employment refers to the number of people in work in an economy.
• The level of unemployment refers to the number of people out of work, actively seeking work and claiming benefit.

People are employed to do a job. That might seem rather an obvious thing to say but it is important. If that job contributes to the businesses sales then people will be needed. If, however, sales fall, some jobs may not be needed anymore and it is then that people can be made redundant and lose their jobs. Some people might lose their jobs because the business they are working for closes down. This can happen if sales fall to an extent that the business cannot cover its costs anymore.

Source: Crown Copyright.

The level of both employment and unemployment can change depending on the level of economic activity. If economic activity falls we might expect to see the level of unemployment rising as a result.

Unemployment not only depends on economic activity but also on the level of skills and qualifications that people have and how easy it is for them to move from job to job (occupational mobility) and also to different parts of the country to find work (geographical mobility).

Unemployment can, in some cases, lead to all sorts of social problems not only for the individual but also for the economy. Those who are unemployed are more likely to be amongst the poorest in society. Copyright: Bauer X, from stock.xchng.

Unemployment can affect both individuals and the economy.

Individuals

• They may find that they have lower incomes which affect their standard of living
• They may find it difficult to keep up with the skills required to find new jobs
• They may suffer family and personal problems
• They may lose their self esteem and self respect
• Lower levels of income are also associated with a greater likelihood of ill health

The Economy

• There is an opportunity cost of unemployment - all the output that those people could have produced if they were employed
• The government receive less tax from unemployed people and this can affect the amount of money they have for public services like health and education
• Unemployed people have to be supported whilst they find work. The cost to the government of paying out benefits can be very high. Again, this takes money away from other public services
• The government might have to pay further money in dealing with the problems caused by unemployment - more crime, family breakdowns, ill health and so on

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