Unemployment: what it is, types, and consequences

Classify these people into the economically active population (working or looking for work) or inactive population (neither working nor looking for work), and within the active population, into employed or unemployed: (a) an employed nurse; (b) a 4th ESO student not seeking work; (c) an unemployed waiter sending out CVs; (d) a retired woman; (e) a father caring for his children who is not seeking employment; (f) a self-employed plumber. Then define economically active population and unemployment rate in your own words.

The figure shows the unemployment rate in Vega del Río over three years, but the figure for the final year is covered. There are $2,000$ people in the town's active population; in Year $1$ there were $200$ unemployed people, in Year $2$, $300$, and in Year $3$, $400$.

1. a) Calculate the three unemployment rates and state what value the covered bar should have.
2. b) Explain in your own words what that rate means and give a possible cause for unemployment rising (the closure of a business, a poor tourist season).

In Villanueva there are $20,000$ people of working age: $12,000$ have a job, $3,000$ are looking for work, and $5,000$ are not looking for work (studying, retired, or caring for the home).

1. a) Calculate the active population and the unemployment rate.
2. b) If $750$ unemployed people find a job, calculate the new unemployment rate.
3. c) Explain why, to calculate the rate, we divide by the active population rather than the total population.

In the town of Rioclaro, the active population is $16,000$ people: $12,000$ employed and $4,000$ unemployed.

1. a) Calculate the unemployment rate.
2. b) One thousand unemployed people give up looking for work and stop being counted as active: calculate the new active population, the new number of unemployed people, and the new rate.
3. c) Explain the paradox: the unemployment rate has fallen without anyone actually finding a job. What does this teach us about how to interpret unemployment news?

Match each case to its type of unemployment — frictional (search), seasonal, structural, or cyclical — and justify one of them: (a) beach lifeguards, unemployed every winter; (b) a checkout assistant replaced by self-service machines who lacks the training required by new job openings; (c) a recent graduate who takes four months to find her first job; (d) construction workers made redundant when a general crisis hits.

Write down two consequences of unemployment for the individual suffering it (economic and personal or health-related) and two for the economy as a whole (lower consumption; the State collects less and spends more on benefits). Expand on one of them using a specific example, real or imagined.

The Ministry of Labor in a country with an unemployment rate of $18\,\%$ has a limited extraordinary budget and is debating how to allocate it among three proposals:

• Proposal A: Subsidising for one year the hiring of individuals under $25$ years old without prior work experience.

• Proposal B: Intensive technical retraining courses for workers laid off from mining and heavy industry, redirecting them towards renewable energy installation.

• Proposal C: A massive investment plan in infrastructure and public works to revive activity during a severe recession.

1. a) Classify which type of unemployment (frictional, seasonal, cyclical, or structural) each of the three proposals attempts to correct and justify your answer in each case.
2. b) Predict which of the measures will have a greater lasting impact on the long-term competitiveness of the economy and which offers only temporary relief. What risk of a "substitution effect" or dependence on public aid could arise in Proposal A if strict conditions are not set?
3. c) If the economy suffers a drastic and immediate drop in household consumption and business investment, which of the three measures will act most quickly as a stabiliser of aggregate demand? Justify your reasoning.

In Spain, the youth unemployment rate often more than doubles the average unemployment rate of the economy. Analyse the situation of two young people looking for a job:

• Profile A: University graduate in Humanities, with no prior work experience and seeking her first skilled position.

• Profile B: A $19$-year-old youth whose highest educational level is ESO, having accumulated four temporary contracts of less than one month in hospitality and food delivery.

1. a) Compare the barriers to entering the labor market for both profiles. Justify why youth unemployment is not due to a single factor, explaining the role played by the lack of experience, contractual temporariness, and skills mismatch.
2. b) The government proposes introducing a "youth training contract" that allows companies to pay $75\,\%$ of the Minimum Wage (SMI) for two years in exchange for devoting part of the working day to internal training. Critically evaluate this proposal: what incentives does it generate for employers? What risks of precariousness or labor abuse could arise if oversight is inadequate?
3. c) Design an alternative or complementary measure aimed at reducing youth unemployment that does not base integration on wage reductions, and argue its viability.

A household appliance factory that employs $400$ people in an isolated rural county announces its permanent closure after offshoring production. The workforce has an average age of $51$ years and an average tenure of more than $20$ years assembling mechanical components.

1. a) Classify the type of unemployment these workers will experience and explain why their chances of immediate re-employment are much lower than those of a recent graduate facing a job vacancy.
2. b) Design a county-level labor reactivation plan structured around three pillars: skills guidance and certification, training focused on new sectors in demand within the county, and the promotion of self-employment or local cooperatives. Justify what each pillar specifically contributes to breaking the inertia of unemployment.
3. c) Predict the "domino effect" that this closure will cause on the county's economy over the following two years (impact on retail trade, municipal tax collection, and local demographics) if the plan is unsuccessful.