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Economic Fundamentals

Section A:
1. Unemployed people are not able to make an economic contribution to the production of goods and services, neither are they able to purchase goods and services, putting an increased tax burden on those who are employed due to the fact that unemployed people do not pay taxes. More specifically, unemployed persons are normally defined as those persons who:
• Are 15 years and older; and
• Are not currently employed; but
• Are available for employment within the next two weeks; and
• Have taken specific steps during the last four weeks to find employment.

2. There are four main types of unemployment;
1. Frictional unemployment; arises when people leave one job straight away until a time as they do find alternative employment. This is not a major cause of unemployment.
2. Seasonal unemployment; occurs when certain types of jobs require workers only for certain times of the year, examples are the agricultural & tourism sectors.
3. Cyclical unemployment; is related to the general strength and vitality of the economy. If the economy is in recession, the demand for goods and services decreases and in turn the producers have to lower production including labour due to lower demand.
4. Structural unemployment; occurs when there is significant gap between education, skill and expertise required for a job and the availability of those appropriately qualified and skilled workers to meet the job requirements. Structural unemployment can also be referred to a situation were jobs change or no longer exist due to structure or composition of the economy.

Structural unemployment is a major cause of unemployment in South Africa, in the 1960’s 25% South Africa’s GDP was made up of the primary sector, where as the secondary sector made up 21% and the tertiary sector contributed to the remaining 54%. By 2006, there had been a substantial change. The contribution of the primary sector dropped below 9%. These were brought about by a number factors including...