2- Employment And Unemployment

Question 1

Define unemployment?

Answer 1

Unemployment

- the number of people looking for work but who cannot find a job at a point in time

Question 2

Extra bits from unemployment?

Answer 2

• Members of the labour force are people who want and are able to work- those who are economically active
• the level of unemployment= the number of people who are employed
• the rate of unemployment= the number of people employed as a % of the labour force

Unemployed➗labour force *100= rate of unemployment

Question 3

Unemployment can be measured as a number. There are two ways go measuring it:

Answer 3

1) claimant count-
- measures the number of people claiming Job seekers allowance(JSA)
2) International Labour Office (ILO)
- quarterly survey of approx. 60,000 households compiled by the office of National Statistics studying the employment circumstance of the UK population
»> includes people who maybe seeking work but who are not entitled to Jobseekers Allowance

Question 4

Why is unemployment undesirable?

Answer 4

1) Lost output- if there is unemployment, there is a waste of economic resources eg labour and so prevents the economy from reaching its full capacity (below the PPF line) and so lower gdp
2) increased spending on JSA, unemployment programmes, welfare benefits diverts spending and resources from more productive spending
3) it reduces income (leads to lost tax revenue) and spending ( lower C, Fall in Vat receipts) and so lower economic growth
4) if it lasts for an extended period, it can mean workers losing their jobs skills. This leads to workers having outdated skills and thus reduces their LR employability
5) it’s a major cause of poverty and the human suffering eg from lower self esteem, poorer diet, stress and health risks
6) reduced demand for goods and services
7) reduced productivity
8) reduced profitability
9) less incentive to invest eg in housing?

All these factors mean that the economy is less likely to maximise economic welfare

Question 5

⬇️in AD, ⬇️in AS
- decreases output
- cause unemployment
What are the four main causes (types) of unemployment?

Answer 5

• Cyclical
• Frictional
• Seasonal
• Structural - which is a part of geographical and regional unemployment as well

Question 6

Define cyclical unemployment?

Answer 6

AKA demand deficient

• Cyclical unemployment is a factor of overall unemployment that relates to the cyclical trends in growth and production that occur within the business cycle. When business cycles are at their peak, cyclical unemployment will be low because total economic output is being maximized
• lack of AD leads to cyclical unemployment

Question 7

Features of cyclical unemployment?

Answer 7

• heavily linked to the economic cycle
• occurs when there is a negative output gap
• high unemployment during recession/periods of low growth
• cyclical unemployment rises due to low demand (demand deficit)

Question 8

Define frictional unemployment?

Answer 8

Frictional unemployment

- unemployment which exists in any economy due to people being in the process of moving from one job to another.

Question 9

Features of frictional unemployment?

Answer 9

• employment that occurs as workers move between jobs mainly through career moves or geographical changes
• typically short term and often exists because workers do not have perfect and immediate information about every job opportunity that maybe available to them
• will be higher if labour is immobile and thus unable to move quickly between jobs
• assumed that there is always some type of frictional unemployment in the economy

Question 10

Define seasonal unemployment?

Answer 10

Unemployment due to downturn in demand for certain types of labour at certain times of year
Eg tourism, agriculture, icecream

Question 11

Define structural unemployment?

Answer 11

• unemployment resulting from industrial reorganization
• occurs when long term shifts in the structure of the economy has an impact upon the job market- decline of jobs in a specific industry
• unemployment due to mismatch of skills demanded (in job vacancy) and skills supplied by the unemployed within a region

Question 12

Whats technological unemployment?

Answer 12

Occurs when improved capital which may be more productive and efficient than labour, replaces labour as a factor of production

Question 13

Structural unemployment is considered part of geographical/regional unemployment? Whats this?

Answer 13

• occurs when unemployment is concentrated in certain areas (eg towns, cities or regions). This can be because..
  »> jobs maybe available in some prosperous areas eg london) however there may be difficulties for unemployed to move cause expensive
  »» or if the area is specialised in the production of a good or service that is no longer demanded or is produced in cheaper economies