2.1.3 employment and unemployment Flashcards
Measures of unemployment
Claimant count
-Number of people claiming JSA
-Not everybody is eligible - e.g. if ones partner earns a high salary
UK labour force survey]
-Follows ILO definition of unemployment
-Working age individual who have been actively seeking work for atleast 4 weeks and are ready to work in 2, available for atleast 1 hour a week
-Includes those not eligible for benefits
Underemployment
-Employed however their job does not fully utilise their skills and qualifications
-Result in part-time work, low wages, jobs below skill level
Significance in changing rates of employment, unemployment, inactivity
-Rising employment rate signals economic growth
-Rising unemployment indicates economic problems
-Waste of workers resources - could lose skills - hysterisis
-Opportunity cost of increased spending on JSA
-Less gov revenue from income tax
-Less gov revenue from indirect tax- less disposable income to spend
-Reduced standard of living
-Cost to firms of retraining workers
-Wages fall but so do profits due to reduced consumption
-Increasing inactivity might reduce size of labour force, reducing productive potential of an economy
Structural unemployment
-Mismatch between skills of workforce and the requirements of available jobs
Sectoral: Long-term decline in demand for goods in an industry e.g. coal mining
Regional: certain regions specialise in declining industries
Techonological: replacement of labour with capital
-Worsened by immobolity of labour - lack of transferable skills
Cyclical unemployment
-Labour is derived demand
-If demand for goods increases, demand for labour that produces these goods also increases across that industry
-Changes with economic cycle
Frictional unemployment
-Temporary unemployment while people are changing jobs or entering the workforce
-Not damaging
Real wage unemployment
-Wages above market rate
-When there is a fall in demand for labour, real-wages do not adjust downwards because they are sticky
-Trade unions and minimum wage may push wages above market clearing
-High wages lead to an extension in supply of labour as more workers are incentivised to join the workforce, this leads to a contraction on demand for labour as COP are higher
Seasonal unemployment
-Seasonal variations in demand for labour
-E.g. tourism industry
Impact of migration on unemployment
-Can fill labour gaps
-Wage pressues
-Increase skillset which increases global competitiveness - higher productivity if skills complement with domestic workers
-Could possibly replace domestic workers
-Workforce is more adaptable
Effects of unemployment on workers
-Lost income
-Reduced job prospects
-psychological stress
-hysterisis - become deskilled in LR
-Those still employed motivated to work harder as they fear job loss
Effects of unemployment on firms
-Larger labour pool
-Reduced revenue due to reduced demand
-Reduced profits
-Less productive workers when rempoloyed
-Price of training
Effects of unemployment on gov
-Increased transfer payment - JSA - opportunity cost
-Budget deficit increases
-Reduced tax revenue - income and indirect
-2008 financial crisis
