Edexcel IGCSE Economics (4EC1) · Section C: Government and the Economy
Specification points
- Unemployment and how it is measured.
- The causes (types) of unemployment.
- The consequences of unemployment.
What is unemployment?
Unemployment is when people able and willing to work cannot find a job. The unemployment rate is the percentage of the labour force that is unemployed.
Unemployment rate = (number unemployed ÷ labour force) × 100
Types (causes) of unemployment
- Cyclical (demand-deficient) — from a recession, when low demand cuts jobs.
- Structural — from the decline of an industry, leaving workers with the wrong skills or location.
- Frictional — short-term, while moving between jobs.
- Seasonal — from the time of year (tourism, farming).
Key definitions
| Term | Definition |
|---|---|
| Unemployment | People able and willing to work who cannot find a job. |
| Structural unemployment | Unemployment from a mismatch of skills or location. |
| Labour force | Everyone working or actively seeking work. |
Consequences of unemployment
| For the unemployed | For the economy |
|---|---|
| Lower income and hardship | Lost output |
| Loss of skills over time | Lower tax revenue; higher benefit spending |
Unemployment harms individuals (income, skills) and the economy (output, tax, benefits).
Policies
- Cyclical unemployment needs demand-side policy (expansionary fiscal/monetary).
- Structural/frictional unemployment needs supply-side policy (education, training, job information).
Worked example
A car factory closes because its models are outdated. Its workers become structurally unemployed — their skills no longer match available jobs. Boosting demand alone will not help; they need retraining (a supply-side response) to move into growing industries.
Common exam mistakes
- Confusing cyclical (recession) with structural (declining industry) unemployment.
- Matching the wrong policy to the type.
Exam technique
Identify the type of unemployment from the context, then match a suitable policy and explain the consequences.
Quick revision
- Types: cyclical, structural, frictional, seasonal.
- Costs: lost income and skills; lost output, tax and benefit costs.
- Cyclical → demand policy; structural → training.