2.1.3 Employment and unemployment

Question 1

Measures of unemployment: The claimant count

Answer 1

The total number of people receiving job seekers allowance/benefits for being unemployed.

Question 2

Measures of unemployment: Labour force survey (ILO)

Answer 2

The ILO measure of unemployment uses the labour force survey, defines someone as unemployed if they are without a job, want a job, and have actively sought work in the last 4 weeks.

Question 3

Differences between the Claimant Count and LFS

Answer 3

-Different methods of collection are used: imply different results
-Some unemployed people are not eligible for job seekers allowance/benefits. LFS>Claimant account
-Some unemployed people do not wish to claim job seekers allowance/benefits, or are unaware of their right to claim. LFS>Claimant account

Question 4

Unemployment

Answer 4

Those of working age who are without work, able to work and
seeking work and have actively sought work in the last 4 weeks and are available to start work in the next 2 weeks.

Question 5

Underemployment

Answer 5

-When a worker is working fewer hours that what they would like.
-When a worker is under-utilised in terms of ability.

Question 6

Economically active

Answer 6

Those employed and unemployed. Those of the working age seeking employment and able to start work.

Question 7

Economically inactive

Answer 7

Those who are neither employed nor unemployed. Those of the working age not seeking employment as well as those seeking employment but not able to start work due to e.g. studying, health related issues, looking after family etc.

Question 8

Rates: Employment rate

Answer 8

The percentage of the population of working age who are employed.

Question 9

Rates: Unemployment

Answer 9

The percentage of the economically active who are unemployed.

Question 10

Rates: Inactive

Answer 10

The percentage of the population of the working age who are inactive.

Question 11

Significance in changes of activity

Answer 11

-Increase in inactivity leads to a fall in the productive potential of the economy. Lower GDP and Tax revenues.
-Decreases in inactivity could result in more people being unemployed if there are no jobs available.

Question 12

Causes of unemployment: Frictional

Answer 12

This occurs between the time when workers are unemployed and when they find a new job.
(short term)

Question 13

Causes of unemployment: Structural

Answer 13

The two main causes of this are:
Geographical immobility - workers that are unwilling to move in order to find a job.
Occupational immobility: Either workers having no skills, or skills that are no longer needed.
(Long-term)

Question 14

Causes of unemployment: Seasonal

Answer 14

Some employment is strongly in seasonal demand. e.g. ski instructors etc.

Question 15

Causes of unemployment: Cyclical

Answer 15

A fall in aggregate demand in a n economy.
-Where there is a recession or a slowdown in economic growth. Due to the fall in demand, businesses are forced to lay people off to maintain profit margins.

Question 16

Real wage flexibility

Question 17

Significance of migration:

Answer 17

Effects for employment:
-Increased size of population means there is an increase in supply of labour.
-Consumer spending from an increased population means more jobs are created (circular flow of income).
Effects for unemployment:
-Increased immigration means more people looking for work, so would likely increase unemployment

Question 18

Significance of skills:

Answer 18

Effects for unemployment:
-High occupational immobility in the workforce, means people become long-termed unemployed as their skills do not fit jobs on offer.

Question 19

Effects of unemployment: Consumers

Answer 19

-Consumers have less available to spend

Question 20

Effects of unemployment:
Firms

Answer 20

-Decrease in demand for goods/services (depends on YED), could lead to a fall in profit.
-Long-term unemployment may lead to a loss of skills, this creates a smaller pool of skilled people to employ.
-Firms offer lower wages to those that have few other options.

Question 21

Effects of unemployment:
Workers

Answer 21

-Loss of income, resulting in a decline of living standards.
-Suffer from the stigma of being unemployed, and can feel degraded by receiving job seekers allowance/benefits.
-The long-term unemployed find it hard to find a job as they lose skills.

Question 22

Effects of unemployment: Government

Answer 22

-Reduced income results in a fall in tax revenues and higher spending on welfare payments for those out of work. (opportunity costs - money could be spent elsewhere)
-Higher spending on welfare payments, can increase the budget deficit.

Question 23

Effects of unemployment:
Society

Answer 23

-Loss of potential national output
-Areas of high unemployment often see a fall in demand for goods/services, leading to a fall in income of people working those services and sometimes further loss of jobs.
-Rise in social deprivation, there is a relationship between