2. Employment/unemployment Flashcards
Define unemployment
Results when people seeking work at the going wage cannot find a job
People who are economically active but not in employment
Define employment
People who are either working for firms or other organisations, or self employed.
Explain what is meant by the macro economic policy objective if full employment
Full employment = a situation where people who are economically active in the workforce and are willing and able to work(at going wage rates) are able to find employment.
To make best use of labour resources - attain all potential output
Why? Unemployment is costly to those who are employed and to society as a whole
Distinguish between LFS and CC measures of unemployment
Claimant count is the number of people claiming job seekers allowance each month (problem: includes those claiming benefit but not available to work/ excludes ppl looking for work but not eligible for unemployment benefit e.g. Women after birth)
Labour force survey: identifies the # ppl available for work, seeking work, but without a job
Evaluate the difficulties of accurately measuring employment. Problems of measurement
Cc is unreliable: only captures those eligible for JSA, excluding some who might be validly recognised as unemployed.
E.g. Women after birth, those on government training schemes
ILO data is based on sample evidence, extrapolated- its not guaranteed to be fully representative.
Developing countries: lack of social security system provides no incentive to register as unemployed.
Problems Measuring underemployment
Discouraged workers
People who have been unable to find. Employment and no longer looking
Frictional unemployment (causes of )
Unemployment associated with job search : that is, people who are in between jobs
Structural unemployment
Arising because of changes in the pattern of economic activity within an economy
Cyclical unemployment
Arises during the downturn of the economic cycle, such as a recession
Seasonal unemployment
Arises in seasons of the year when demand is relatively low
Voluntary unemployment
Situation arising when an individual chooses not to accept a job at the going wage rate
Evaluate the consequences of unemployment
Costs
Government finance use is deterred. More is spent on benefits to support those in unemployment (also e.g. Crime rates) /factors conventional to addressing the costs incurred from unemployment. There is also less tax revenue. Here an opportunity cost presents itself - GS could contribute to healthcare/education - holding back future generations growth (a LR cost). Unemployment is not sustainable.
Hysteresis - discouraged and deskilled workers adopt life supported by benefits. Less spending = AD is curbed in the future.
Social costs - individual: lost income / status
Evaluate the consequences of unemployment. Benefits
Larger poll of workers for employers to choose, as well as a variety of vacancies for workers to chose from. This can allow for workers to choose a job that enables their labour to be optimally productive - preventing underemployments and making efficient use of labour resources.
Evaluate the consequences of unemployment.
Evaluation
- depends on the type and duration- if structural / LOng run the costs are huge
- the severity (never 0%, natural rate targets 4-6%- where the benefits > costs )
- a countries wealth determines weather unemployment can be tackled even in the SR - ability to afford welfare is detrimental, otherwise poverty can escalate rapidly.
Evaluate the effects of full employment.
A situation where people who are economically active in the workforce are willing and able to work (at going wage rates ) are able to find employment.
Best use of labour and resources all potential output is attained
Not 0%, 4-6%
However can lead to inflationary pressure………
