Basic concepts of macroeconomics: Austerity 
Exercises
Annexe I: Basic concepts of macroeconomics
At the national level
National budget
Unemployment
‘Unemployment’ is defined as the state of being jobless and actively looking for a job. Thus, a lot of people are not considered unemployed even though they are not working. Excluded from the definition of ‘unemployed’ are: people who cannot work due to a disability, women who perform unpaid domestic labour, children, and those who stopped looking for a job (because they cannot find one). Furthermore, caretakers or women who work at home (informally) are not included in employment statistics either.
The unemployment rate is measured by dividing the number of unemployed people by labour force (labour force = employed + unemployed but looking for a job). In general, high unemployment rates often produce negative outcomes for the economy. Governments regularly collect data on unemployment, so that they can implement policies to manage the problem.
There are three different types of unemployment:
Frictional unemployment: Frictional unemployment occurs when people are in between jobs. When people lose their jobs (voluntarily or not) and look for a new one, they fall into this category. Frictional unemployment is inevitable and not considered problematic, because there are always some workers who are going through a process of job change.
Cyclical unemployment: Cyclical unemployment occurs when people lose their jobs (or cannot find any jobs) due to slow economic activity. The unemployment rate increases during the process of contraction or recession. Then the overall demand for goods and services within the society further decreases, further slowing down the economy. However, this type of unemployment is still temporary. When the economy starts to expand again, cyclical unemployment declines as the demand for workers increases.
Structural unemployment: Structural unemployment occurs when the skills of workers do not match with the needs of the business. It is often caused by a structural shift in the economy. For example, development of new technologies (e.g. machines/robots) is a reason for high rates of structural unemployment. Employers can replace workers with robots or machines, because they are cheaper than workers (among other reasons).
Recent studies show that the official numbers regarding the gender unemployment gap (difference between female and male unemployment) have gotten smaller since the early 1980s. An exception to this trend occurs during recessions when a larger number of men suffer from unemployment in comparison to women.1Albanesi, S., & Sahin, A. (2013). The Gender Unemployment Gap. SSRN Electronic Journal.
Women’s increasing labour participation since the 1970s is responsible for this trend. However, it is important to acknowledge that employment by itself is not an indicator of wellbeing for women. Known as feminisation of labour, this trend refers to both an increase in women’s labour force participation and a concurrent degradation in working conditions, social rights, and wages.2Beneria, L. (2003). Gender, Development and Globalization: Economics as if All People Mattered. Routledge. In other words, current employment patterns in insecure, precarious, and informal jobs contribute to the exploitation of women, instead of empowering them.
Basic concepts of macroeconomics: Austerity Exercises
Footnotes
- 1Albanesi, S., & Sahin, A. (2013). The Gender Unemployment Gap. SSRN Electronic Journal.
- 2Beneria, L. (2003). Gender, Development and Globalization: Economics as if All People Mattered. Routledge.