Measure unemployment and compare its causes
Calculate the unemployment rate and connect frictional, structural, cyclical and seasonal unemployment with possible policies.
Section 4.6 · Employment and unemployment
Cambridge IGCSE Economics 0455 / IGCSE (9–1) Economics 0987, 2027–2029 Version 1. Apply each model to the stated evidence and qualify conclusions where effects depend on context. Practice is original and self-checked; it is not a Cambridge paper, mark scheme or official grade.
Before you begin
- No prior economics study is assumed. Read the scenario for the decision-maker, the market or economy involved, the time period and the evidence supplied.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
A worker loses a job because a local factory automates and their skills no longer match vacancies. Which type is most likely?
What you will learn
- Define employment and unemployment
- Calculate the unemployment rate
- Explain types, consequences and policies
Measurement depends on the definition
The labour force includes people employed or actively seeking and available for work under the survey definition. The labour force survey measures unemployment through questions about work status and job search.
Unemployment rate = unemployed people ÷ labour force × 100. The rate is not the share of the total population; it excludes people outside the labour force under the chosen measure.
Different causes need different responses
Frictional unemployment occurs while people move between jobs; structural unemployment arises from a mismatch between skills or locations and vacancies; cyclical unemployment follows changes in economic activity; seasonal unemployment follows regular seasonal patterns. Full employment means people willing and able to work can find work; it does not mean every person in the population is employed.
Unemployment can reduce income and output and increase public support costs. Training, job information, regional support or demand measures may help, but effectiveness depends on cause, timing and available jobs.
Pause and explain
Why may a labour force survey give a different unemployment count from a benefit register?
Worked example
A labour force has 2 million people, including 100,000 unemployed. Calculate the unemployment rate.
Show the worked solution
- Divide unemployed people by the labour force.
- 100,000 ÷ 2,000,000 = 0.05.
- Multiply by 100 to express a percentage.
Answer The unemployment rate is 5%.
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Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A labour force is 800,000 and 32,000 people are unemployed. Calculate the unemployment rate.
Give me a hint
Unemployed ÷ labour force × 100.
Compare my reasoning
- 32,000 ÷ 800,000 = 0.04.
- Multiply by 100.
- State the percentage.
The unemployment rate is 4%.
Look for these in your work
- Denominator correct
- Conversion correct
- Percentage stated
A coastal town has high unemployment between tourist seasons. Explain the likely type and one policy response.
Give me a hint
Use the repeated seasonal timing, then match a response to the period.
Compare my reasoning
- Demand falls after the tourist season.
- The pattern is seasonal unemployment.
- Training or off-season job matching may help, though local vacancies matter.
The regular off-season fall in work suggests seasonal unemployment. Off-season training or matching workers to other local jobs may help, depending on available demand.
Look for these in your work
- Cause identified
- Type classified
- Response matched
A government offers retraining after a major industry closes. Explain why this may reduce structural unemployment but cannot guarantee full employment.
Give me a hint
Connect skills mismatch with the number and location of jobs.
Compare my reasoning
- Training can improve relevant skills.
- Workers still need suitable vacancies and may face relocation barriers.
- Other sources of unemployment can remain.
Retraining may help workers qualify for new vacancies, addressing a skills mismatch. It cannot guarantee enough jobs or overcome location, experience or cyclical-demand constraints by itself.
Look for these in your work
- Mismatch addressed
- Vacancies/location considered
- Guarantee avoided
Common mistakes
- Using total population as the denominator
- Assuming one policy can address every unemployment type
- Treating all people not working as unemployed
What can you explain now?
What can cause cyclical unemployment?
Compare with the explanation
A fall in economic activity and demand
Lower sales can reduce firms' demand for labour.
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Make it stick
What can cause cyclical unemployment?
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