2.1.3 Employment and unemployment Flashcards

2.1 Measures of economic performance

1
Q

What does it mean if someone is unemployed?

A

Someone who is not in work but has looked for work in the last FOUR WEEKS and is READY TO START working in the next TWO WEEKS (including people who are waiting to start a job in the next two weeks)

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2
Q

What does it mean if someone is economically inactive?

A

They are not in work, don’t want to be in work and have stopped actively searching for work

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3
Q

Why might someone be economically inactive?

A
  • education (student)
  • retirement
  • looking after someone (e.g. child/relative)
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4
Q

Define voluntary unemployment

A

A situation where the unemployed choose not to accept a job at the going wage rate

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5
Q

Why might someone choose to be voluntarily unemployed?

A
  • generous unemployment benefits
  • high marginal tax rates (may be worse off if they have a job)
  • hoping to find a job more suited to their skills/qualifications
  • some jobs may be too demeaning/tedious
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6
Q

Define involuntary unemployment

A

A situation where workers are willing to work at the market wage (or just below) but are prevented from doing so by factors beyond their control

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7
Q

Why might someone be involuntarily unemployed?

A
  • deficiency of AD (lack of derived demand for labour)
  • labour market inflexibilities
  • efficiency wage theory: the market does not clear as the wage rate is above the equilibrium, which causes excess supply of labour (not enough job spaces available)
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8
Q

Define the ‘unemployment rate’

A

The number of unemployed people as a percentage of all ‘economically active’ people

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9
Q

How does the Claimant Count measure unemployment?

A

Measures the number of people claiming benefits because they are out of work:
- includes people who are on: Jobseeker’s Allowance and those claiming Universal Credit

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10
Q

How is unemployment measured using the Labour Force Survey?

A

The survey asks people if they are:
- currently out of a job
- actively seeking work
- ready to immediately start work

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11
Q

Limitations of the Claimant Count and Labour Force Survey as a means of measuring unemployment

A

The figures may be underestimated/inaccurate as:
- the LFS only takes a sample from the entire population (may be unrepresentative)
- CC excludes those who are looking for work but are not eligible to claim benefits
- those who are underemployed are not included
- those who are in ‘hidden unemployment’ are not included
- measures of unemployment exclude the economically inactive

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12
Q

Who are the hidden unemployed?

A

Those who are:
- working part time but would like to work full time
- on govt. training schemes who would prefer employment or classed as sick/disabled
- who aren’t actively looking for jobs but would take a job if offered
- who are in education because they can’t get a job

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13
Q

What does it mean if someone is underemployed?

A
  • Someone who is in a part-time or zero hour contract when they would prefer to be full time (unstable/low-paid)
  • Someone who is self-employed but would rather be employed
  • Someone who is in a job that does not reflect their skill level (few opportunities/undervalued)
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14
Q

Consequences of underemployment

A
  • less incomes earned: less tax rev.
  • wasted resources (working below YFe/overqualification/unproductive economy)
  • can affect career prospects (reduces the chance of securing a better role)
  • can lead to stress/overworking (working multiple jobs to compensate for unstable contracts)
  • lack of motivation: poorer quality production and less efficiency
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15
Q

What does it mean if someone is over-employed?

A
  • Someone who wants to work less hours but with the same pay
  • Someone who wants to work less hours and will accept less pay
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16
Q

How does an increase in ec. inactivity affect the economy?

A

Decreases the size of the labour force:
- causes a fall in productive potential
- lower GDP
- lower tax rev.
OR
- could result in more people being unemployed if there are no jobs available to them

17
Q

What is seasonal unemployment?

A

Unemployment caused by changes in demand for workers during seasonal changes (e.g. farming/tourism)

18
Q

What is frictional unemployment?

A

Unemployment that occurs as people move between jobs (in-between jobs or seeking better jobs)

19
Q

What is structural unemployment?

A

Unemployment that occurs when there are significant changes in the pattern of unemployment in the economy (the labor market is unable to provide jobs due to a mismatch between the skills/qualifications of job seekers and the available job opportunities)

20
Q

Causes of structural unemployment

A
  • changes in technology
  • changes in structure of the economy
  • changes in demand for certain skills/occupations (skill gaps)
  • employer discrimination
  • disincentive effects: child care costs/commuting/tax and welfare
21
Q

What is cyclical (demand-deficient/Keynesian) unemployment?

A

Unemployment caused by a shortage of demand in the economy, leading to a reduction in production and then a reduction in employment (derived demand) - directly linked to the business cycle

22
Q

How does the wage rate affect the demand for labour?

A
  • if the wage rate is high, the demand for labour is lower
  • if the wage rate is lower, the demand for labour is high (can take on more workers/cheaper than capital)
23
Q

What causes the demand for labour to shift outwards?

A
  • a rise in the level of consumer demand (derived demand: the business needs to take on more workers)
  • an inc. in the productivity of labour (more cost efficient than capital)
  • a govt. employment subsidy (allows businesses to employ more workers)
24
Q

What causes the demand for labour to shift inwards?

A
  • if the economy falls into recession (decreased derived demand)
25
Q

Causes of demand-deficient unemployment

A
  • high int. rates
  • global recession
  • negative multiplier effect
  • financial crisis
26
Q

What is occupational immobility?

A

When workers aren’t able to move from one occupation to another with ease

27
Q

Examples of occupational immobility

A
  • skills mismatches
  • cost/time of training and education
  • criticisms with the education system
  • trade/practical jobs not seen as traditional to academic jobs
28
Q

What is geographical immobility?

A

This occurs when there are barriers to moving from one area to another to find/start work (cannot or don’t want to), resulting in a misallocation of resources/market failure

29
Q

Causes of geographical immobility

A
  • financial costs from moving
  • costs of living/house pricing/renting differences
  • migration controls
  • family/social ties
30
Q

What is real-wage (classical) unemployment?

A

Unemployment that occurs when wages are set above the equilibrium level, resulting in an excess supply of labor or unemployment

31
Q

Causes of real wage unemployment

A
  • wage rigidity: sticky wages
  • trade unions: bargaining for wages to not be dropped
  • national minimum/living wage: legal minimum that an employer can pay its workers
32
Q

What are sticky wages?

A

When wages get stuck and fail to adjust downwards during a recession/periods of deflation.

This can be due to firms not wanting to cut nominal wages as it may lead to a fall in morale/motivation between workers, which could lead to less output/productivity.

33
Q

Consequences of unemployment

A
  • loss of income: people worse off/decline in living standards
  • negative multiplier effects
  • loss of national output: waste of scare resources
  • fiscal costs: fall in tax rev./higher expenditure on welfare and benefits
  • social costs: crime/divorce rates
  • loss of rev. and profit
  • loss of skills: long-term unemployment can reduce skills and employability
  • falling wages: firms may offer lower wages if there are lack of job options for the unemployed
34
Q

Impacts of migration on (un)employment

A
  • inc. net migration can lead to inc. jobs
  • those who migrate are less likely to claim benefits
  • those who migrate often take lower-skilled jobs
  • could lead to lower wages (inc. S of labour)
  • more comp. for jobs (esp. those who have lower skills)
35
Q

Significance of skills to (un)employment

A
  • as economies progress, higher skills are needed (often results in people becoming long term unemployed)
  • to maintain employment levels, the skills of the workforce need to increase (firms may struggle to recruit skilled workers despite having unemployment in an area)
  • if firms do not train staff, the govt. may have to step in, which may be costly
  • skills shortages: can lead to reduction in productivity/loss of revenue/poor work quality/inability to expand