2.1.3 - Employment and Unemployment Flashcards
Define Unemployment
When someone is willing and able to work but can not find a job despite actively seeking for one.
How can we measure unemployment ?
● Claimant count = measures the number of people claiming job seekers allowance in the UK.
● The International Labour Organisation (ILO) and the
UK Labour Force Survey = a survey given to a random sample of households within the UK. The households then tick a box to determine whether they fit the ILO definition of unemployment. Unemployment statistics are then made based upon the results of these surveys.
What is underemployment
Those who are working for a job that they are overqualified for and where their skill set is not being fully utilized.
Unemployment rate equation.
Employment rate equation.
Labour force participation rate equation.
Inactivity rate equation.
Why employment rate be increasing even as the unemployment rate is increasing ?
- be caused by increased immigration which increases the number of people that are in the workforce.
-May be due to a reduction in the number of people who are not actively searching for a job and therefore aren’t in the workforce. Decrease in the inactivity rate as people move from inactive to employed
Why would the number of people not working could rise whilst the employment figure increases >
This is due to an increase in the number of people who are economically inactive. These individuals will not be in work; however they will not be counted in the unemployment figure.
Inactivity.
Name the 4 types of unemployment.
- Structural
- Frictional
- Seasonal
- Cyclical/demand derived unemployment
Structural Unemployment
The two main causes of structural unemployment include:
● Geographically immobility* - Workers are unable to move in order to find a job e.g. due to family ties or the costs involved in moving houses.
● Occupational immobility - Workers either having no skills, or skills that are no longer needed. A good example of this was during the closure of the coal mines. The majority of workers only had mining skills and therefore could not find a new job as they had no relevant skills. Therefore, they either remained unemployed, dropped out of the workforce, or retrained. This caused a big increase in unemployment during the 1980’s
Frictional Unemployment
● The time period between when workers are unemployed and when they find a new job. During the time that they are looking for a new job, they are frictionally unemployed.
This is usually short-term unemployment
Workers have voluntarily left their previous job to search for another
Seasonal unemployment
● When people become unemployed as certain seasons come to an end and labour is not required until the next season
E.g. fruit pickers; summer seaside resort workers; ski instructors
Cyclical/Demand derived unemployment
● caused by a decrease in the aggregate demand of an economy (AD1 to AD2). A decrease in AD means that there is a decrease in the demand for goods/services within the economy. As the demand for labour is derived from the demand for goods/services, a decrease in AD causes unemployment to increase. This is due to the fact that firms do not need as much output as before as there is not enough demand to sell all the goods/services that they currently produce. As firms do not need to sustain their current output levels, there is no need for the current number of employees/to hire more employees. Therefore, firms will reduce the number of staff they have to meet the change in the level of demand for their goods/services, or they stop hiring more employees. This causes output/real GDP to fall (Y1 to Y2) and an increase in the general price level (P1 to P2).
Real wage flexibility
How does migration affect Employment/Unemployment
What are the effects of unemployment on consumers, firms,
workers, the government and society
