The labour force is people with a job or registered as looking for work. The participation rate is the fraction of the population of working age who are in the labour force. The unemployment rate is fraction of the labour force without a job but registered as looking for work.

Discouraged workers, pessimistic about finding a job, leave the labour force.

Frictional unemployment is the irreducible minimum unemployment in a dynamic society.

Structural unemployment arises from the mismatch of skills and job opportunities as the pattern of demand and supply changes.

Demand-deficient unemployment occurs when output is below full capacity.

Classical unemployment describes the unemployment created when the wage is deliberately maintained above the level at which the labour supply and labour demand schedules intersect.

Equilibrium unemployment (also called the natural rate of unemployment) is the unemployment rate when the labour market is in equilibrium.

A worker is voluntarily unemployed if, at the given level of wages, she wishes to be in the labour force but does not yet wish to accept a job.

An involuntarily unemployed worker would accept a job offer at the going wage rate.

Supply-side economics is the use of microeconomic incentives to alter the level of full employment, the level of potential output and equilibrium unemployment.

Mismatch occurs if the skills that firms demand differ from the skills the labour force possesses.

The replacement rate is the level of benefits relative to wages in work

Trade union power is measured by the ability of unions to coordinate lower job acceptances, thereby increasing wages but reducing employment.

The marginal tax rate is the fraction of each extra pound of income that the government takes in tax. This creates a tax wedge between the price the purchaser pays and the price the seller receives.