12) unemployment

Question 0

What is the clamant account

Answer 0

⚫️measure the number of people
➡️out to work
➡️and claiming benefits
➡️such as JSA

Question 1

What does the ILO define unemployment as

Answer 1

⚫️people of working age who are
➡️without work
➡️available for work
➡️actively seeking for work

⚫️in the UK this is called
➡️labour force survey measure of unemployment

Question 2

Why is the claimant count measure usually below ILO measure

Answer 2

⚫️many recorded as unemployed by ILO
➡️not entitled to claim benefits

⚫️can not claim JSA if under 18
➡️but ILO includes over 16s

⚫️cannot claim JSA if you have high level of savings in the bank

Question 3

What are the causes of unemployment

Answer 3

➡️cyclical

➡️structural

➡️frictional

➡️seasonal

Question 4

What does cyclical mean

Answer 4

➡️workers unemployed due to insufficient AD in the economy

Question 5

What is the suggested policy solutions for cyclical unemployment

Answer 5

⚫️increase AD
➡️by using expansionary fiscal policy
➡️e.g. Government can cut tax to increase spending

Question 6

What does structural mean

Answer 6

⚫️when unemployed do not have right skill for the job available
➡️so become occupationally immobile

Question 7

What is the suggested policy solution for structural unemployment

Answer 7

⚫️government can use supply-side policy, to provides retraining and education

➡️programme such as new deal
➡️targeted at people under age 24
➡️includes education and work experience
➡️in exchange for benefits

Question 8

What does frictional unemployment mean

Answer 8

⚫️workers are temporarily unemployed
➡Even though job exists
➡️they have not found it yet

Question 9

What is the suggested policy solution for frictional u employment

Answer 9

⚫️supply side policy to improve information in the market
➡️e.g providing job centres
➡️online job information

Question 10

What is seasonal unemployment

Answer 10

⚫️workers are temporarily unemployed because a business has low level of demand at particular times of the year
➡️e.g tourism

Question 11

What is the suggested policy solutions for seasonal unemployment

Answer 11

⚫️supply-side policy to encourage a good balance of jobs in an area
➡️provide subsidies for hi-tech start ups
➡️or help create industrial parks in seaside towns

Question 12

What is the cost of unemployment to the economy

Answer 12

➡️economy is working inside its PPF
➡️with an output gap
➡️so it is below potential output

Question 13

What is the cost of unemployment to the society

Answer 13

⚫️areas with high level of unemployment
➡️suffer more from anti-social behaviour
➡️and crime

Question 14

What is the cost of unemployment to the govenment

Answer 14

⚫️the budget deficit (G>T) is likely to increase because:
❎reduced tax revenues from 
➡️income tax
➡️national insurance contribution
➡️VAT

❎increased expenditure
➡️on JSA and other benefits

Question 15

What is the cost of unemployment to the individual

Answer 15

⚫️decrease income
➡️less consumption and living standards

⚫️erosion of skills
➡️long-term unemployed find harder to get back to work
➡because skills out dated, due to technological changes in the work place

⚫️loss of status
➡️lack of work associated with
➡️high rates of depression
➡marital breakdown 
➡️alcoholism

Question 16

What is the benefits of unemployment to the worker

Answer 16

⚫️time to
➡️retrain
➡️gain new skills
➡️move into a job which is more fulfilling

Question 17

What is the benefits of unemployment to the economy

Answer 17

⚫️unemployment=low inflation
➡️due to low levels of AD
➡️lower wage demands of workers

⚫️businesses can easily fill vacancies, as there is always a pool of available labour
➡️so firms can respond quickly to changes in demand
➡️as there is plenty of spare capacity in the economy

Question 18

What is the conclusion for unemployment

Answer 18

⚫️cost of unemployment outweighs the benefits
➡️thats why the governments third macroeconomic policy is low unemployment

⚫up until ️1979 uk government main macroeconomic aim was full employment

⚫️due to the shift towards a free market in 1980
➡️government left unemployment to the free market
➡️preferring to encourage job creation through supply-side reforms, rather than demand management policies