2.1.3 - Employment and Unemployment

Question 1

Definition of Unemployment

Answer 1

Those of a working age who are willing and able to work, actively seeking work but who do not have a job

Question 2

What is the Labur Force Survey?

Answer 2

Quarterly data found by office of national statistics surveying 50,000 households and uses the international labor organization (ILO) definition of unemployment
- used internationally to compare countries

Question 3

What is the difference between unemployment and underemployment?

Answer 3

Unemployed are those who are not in work but seeking it, where as underemployed are those who would work more hours if available or are in jobs which are below their skill level

Question 4

What is the Claimant Account

definition, how often, what benefit

Answer 4

Total number of people claiming unemployment benefits
- monthly
- eg Job Seekers Allowance

Question 5

Conditions to be eligable for JSA

3 examples

Answer 5

• You must attend sessions with a work coach at a DWP office and complete online tasks to prepare for interviews
• You have to be working a maximum of 16 hours per week
• You have to have less than 16,000 pounds in savings

Question 6

Empoyment rate = ?

calculation

Answer 6

Number of people unemployed/The labor force (economically active pop)

Question 7

Causes of unemployment:
Demand deficiency/Cyclical unemployment

Answer 7

Unemployment which occurs when the economy is not in boom (business cycle) - when there is insufficient demand in an economy to maintain full employment
- labour is derived demand

Question 8

Causes of unemployment:
Structural unemployment

Answer 8

• Structual unemployment is about the inmobility of labour
• When the demand for labour is less than it supply in an individual labor market in the economy.
• Geographical inmobility where workers are unwilling or unable to move which causes unemployment
• occupational inmobility where a lack of skills to work in a specific industry causes unemployment

Question 9

Causes of unemployment:
frictional unemployment

Answer 9

• Short term unemployment (between jobs)
• searching between jobs
• having a job but waiting to start work

Question 10

Causes of unemployment:
Seasonal unemployment

Answer 10

when workers are unemployed at certain times of the year

Question 11

Causes of unemployment:
Real Wage inflexibility (Classical Unemployment)

Answer 11

when real wage rates are stuck at a level above that needed to reduce unemployment any further (Caused by minimum wage, being able to earn more from benefits than working)

Question 12

The significance of migration and skills for employment and unemployment:

Answer 12

Migration:
- most from eastern Europe
- More likely to find work and less likely to claim benefits
- They take work which are below their skill levels which are good value for UK employers (take jobs UK population don’t want)
- CFI - The spending creates further jobs in the UK
- Total UK employment increases without an increase in unemployment

However:
- depresses wage rates due to the supply of labour increasing
- Takes jobs away from low skilled UK workers

Skills:
- average skill level required by workers is much higher and increasing
- In order to maintain employment levels in a competitive global market, workforce skill must continue to increase
- Structural unemployment is common as skills required by jobs are not matched by job seekers and training is very costly

Question 13

The effects of unemployment on consumers, firms, workers, the government and society

Answer 13

Consumers:
- lose out because they are able to spend less
- Consumers in high unemployment areas lose out as services become run down

Firms:
- unemployment represents a loss in demand in the economy – there is less spending
- Long-term unemployment reduces the pool of skilled workers that a firm could hire

workers:
- lack of income
- Social problems including stress, mental stability, suicide rates
- ST: costs are relatively low, lose some earnings but may get redundancy payments and social costs are small
- LT: The longer they are unemployed, the less likely they will be able to find a new job, loss of work skills and training, negative loop as they can’t get a job without recent experience but they can’t get recent experience without a job - Employers not wanting to hire as there must be a reason the applicant was turned down for previous jobs

Government:
- have to pay out increased benefits
- Decreased tax revenue (less VAT tax due to decreased spending, less contributions to income tax and national insurance on their earnings)
- Costs of training schemes or subsidy employers

Society:
- loss of output so less goods and services are available for consumption
- Social costs such as increased violence and depression due to unemployment