2.1.3 - Employment and unemployment

Question 1

What is unemployment?

Answer 1

The number of people actively looking for work but can’t find a job at a point in time

Question 2

What’s the level of unemployment?

Answer 2

Number of those unemployed.

For example, 4M people unemployed

Question 3

What are the two measures of unemployment?

Answer 3

• Claimant Count
• Labour For Survey

Question 4

What is the Claimant Count?

Answer 4

The number of peope claimg Job Seekers Allowance (JSA).

Question 5

What is the Labour Force Survey (International Labour Organisation)

Answer 5

This is a quarterly survey of approximately 60k households compiled by the Office of National Statistics studying the employment circumstances of the UK population.

Question 6

What is the rate of unemployment?

Answer 6

The number of people unemployed as a percentage of the labour force.

Question 7

What does the labour force include?

Answer 7

The labour force includes all those who are economically active - those who are willing and able to work.

Question 8

Name 3 problems with the Claimant Count

Answer 8

• Not everyone who eligible signs on
• Self-employed workers who are temporarily unemployed tend not to claim
• U18s and Over 60s don’t count
• There is changing criteria for Job Seekers Allowance
• Some people have jobs in black economy but continue to claim unemployment

*point 1-4 underestimate unemployment statistics

point 5-6 overestimate unemployment statistics

Question 9

What is the formula to discover the rae of employment labour force?

Answer 9

Unemployed X 100 = ROU Labour Force

*ROU = rate of unemployment

Question 10

Name 3 advantages of the Labour Force Survey

Answer 10

• Globally recognised
• Potential for analysis of data
• Picks up trends in sectors
• Better guide for policy makers
• Generally accepted to be more accurate

Question 11

Name 2 cons of the Labour Force Survey

Answer 11

• Expensive
• Subject to sampling and extrapolation errors

Question 12

What’s the International Labour Organisation definition of unemployment?

Answer 12

Someone who is out of work but willing and able to work

Question 13

What is underemployment?

Answer 13

When workers can’t find a job that’s suitable for their qualifications + experience or who can’t find hours to work.

*Links to graduates looking for work
*Links to zero-hours contract workers

Question 14

Why is change in rates significant in employment?

Answer 14

Employment is the record number of people who work in the UK. However, the employment rate isn’t at its peak. This is due to population growing in size maybe because of immigration or early marriages.

Question 15

Why is change in rates significant in unemployment?

Answer 15

The rate of unemployment is the number of people employed as a percentage of the labour force. The rate of unemployment has fallen significantly in 2015 and is heading for the lows that the UK experienced in the 2000s

Question 16

Why is change in rates significant in inactivity?

Answer 16

Inactivity includes the potential workers which have withdrawn from the workforce in order to look after sick relatives, are on long-term sick leave or have simply given up on looking for work. This can lead to major challenges for individuals and their families who can become isolated and in some cases experience despair.

Question 17

What two things determine how bad the consequences are of the change in rates of employment, unemployment and inactivity?

Answer 17

• The rate (how much it’s occurring)
• The duration (how long it’s been occurring)

Question 18

What will be affected by the change in rate of employment, unemployment and inactivity?

Answer 18

• The economy
• Businesses
• The unemployed

Question 19

What is structural uneployment?

Answer 19

This is when unemployment occurs due to long-term changes in sectors. For example, the long-term shift from then primary and secondary sectors to the tertiary sectors.

Question 20

What is frictional unemployment?

Answer 20

This occurs when workers move between mainly through career moves or geographical changes.

Question 21

What is seasonal unemployment?

Answer 21

This occurs when workers are unepmloyed at different times of the year.

Question 22

What is cyclical unemployment?

Answer 22

This occurs when there is a negative output gap and is heavily linked to the economic cycle. This type of unemployment indicates that demand is low.

Also, known as demand-deficient unemployment.

Question 23

Describe the graph for cyclical unemployment

Answer 23

• Y axis is labelled as “GDP”
• X axis is labelled as “Time”
• There’s a dotted line which slants upwards and is labelled as “Trend Line”
• There is a squiggly line which goes up and down across the “Trend Line” and the squiggly line is labelled as “Actual GDP”

Question 24

What is the negative output gap?

Answer 24

The negative output gap is the space below the “Trend Line” which is also above the “Actual GDP”.

Question 25

What happens when the economy performs below the trend line?

Answer 25

If the economy is in a recession and operating at low points of “Actual GDP” this means that firms won’t need as much workers because they don’t need to produce goods as demand has fallen.

As the economy recovers and moves towards a positive output gap cyclical unemployment will reduce.

Question 26

What’s the graph for supply-side unemployment?

Answer 26

SRAS + AD graph

Question 27

Draw a SRAS graph for supply-side unemployment

Answer 27

• Y axis labelled as “Price Level”
• X axis labelled as “RNO”
• Price Levels labelled across the Y axis
• Unemployment can be labelled across the X axis
• Equilibrium points

Question 28

Draw a graph for demand-side unemployment

Answer 28

• Y axis labelled as “Price Level”
• X axis labelled as