4.7 Employment and Unemployment

2026 Syllabus Objectives

By the end of this topic, you should be able to:

  • 4.7.1 Define employment, unemployment, and full employment
  • 4.7.2 Explain the changing patterns and levels of employment (e.g. growth of the tertiary sector, more women in the workforce, shift away from the public sector)
  • 4.7.3 Explain how unemployment is measured using the claimant count and labour force survey, and calculate the unemployment rate
  • 4.7.4 Identify and explain the causes/types of unemployment: frictional, structural, and cyclical
  • 4.7.5 Describe the consequences of unemployment for individuals, firms, and the economy
  • 4.7.6 Explain the policies used to reduce unemployment and evaluate how effective they are

4.7.1 — Definitions: Employment, Unemployment, and Full Employment

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What is Employment?

Employment means being involved in a productive activity for which you receive a payment. In simple terms — if you work and get paid, you are employed. This includes full-time workers, part-time workers, and self-employed people (people who run their own business).

What is Unemployment?

Unemployment occurs when a person is willing and able to work but cannot find a job. It is important to understand that just "not working" does not automatically make someone unemployed. For example, a retired person is not working, but they are not counted as unemployed because they are not looking for work.

What is Full Employment?

Full employment describes a situation where everyone in the economy who is willing and able to work has a job — or more practically, when unemployment is at its lowest possible rate. Economists do not expect unemployment to ever be exactly zero, because there will always be some people moving between jobs. So full employment means the economy is as close to zero unemployment as is realistically achievable.

The Labour Force

The labour force (also called the working population) includes all people who are either employed, unemployed, or self-employed — in other words, everyone who is willing and able to work.

The working-age population is a broader group — it includes the labour force plus people who are of working age but have chosen not to participate (called the non-participating group).

So:

Working-age population = Employed + Unemployed + Self-employed + Non-participating

Labour force = Employed + Unemployed + Self-employed

People who are not in the labour force are called economically inactive. They are of working age but are not seeking work. Examples include:

  • Stay-at-home parents
  • Retired people
  • Full-time students
  • People with disabilities who are unable to work

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