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If somebody does not have a job, this does not necessarily mean they are unemployed. Some people choose not to work, either because they are wealthy or because they have family to look after. Others may not be able to work because they are ill. People who are unemployed are those who are actively seeking employment but are unable to find work.

How people become unemployed

Some reasons people become unemployed is that they are:

• maderedundant – people whose last job ended because there was no more work available or no further need for their role
• dismissed – people whose last job ended because they broke their contract of employment, eg by engaging in misconduct
• a school, college or university leaver – people who have completed full-time education and are seeking work for the first time

The impact of unemployment

Unemployment means that an economy is not making full use of the workers that are available. The economy will not grow as quickly as it could, and it may start to slow down. This downturn in economic activity will directly affect businesses.

Higher unemployment will mean that many households will have less income. For many businesses, this will result in lower sales as people spend less. However, the demand for some products and services will increase when unemployment is higher. This is because consumers swap to cheaper alternatives. Such goods and services are often supermarkets’ own-brand products and are sometimes thought of as lesser-quality goods. Businesses that provide them may benefit from higher levels of unemployment.

Businesses that benefit when there is an increase in unemployment will also have more people to choose from if they need more staff. Businesses looking to recruit people may also be able to offer lower pay and still attract new staff, although they cannot offer less than the national minimum wage.