2.1.3 - employment and unemployment

Question 1

What are the two main measures of unemployment in the UK?

Answer 1

The Labour Force Survey and the Claimant Count.

Question 2

Who conducts the Labour Force Survey and what does it involve?

Answer 2

Conducted by the international labour organisation, which uses a questionnaire to ask people aged 16–65 about their personal circumstances and activity in the labour market, classing them as employed, unemployed or economically inactive.

Question 3

Who is classified as employed under the Labour Force Survey?

Answer 3

Those who do more than an hour of paid work a week or are temporarily away from work, are on a government supported training scheme or do minimum 15 hours of unpaid work for family business.

Question 4

Who is classified as unemployed under the Labour Force Survey?

Answer 4

Those of working age who are willing and able to work and actively seeking a job in the last 4 weeks and are available to start in next 2 weeks.

Question 5

Who is considered economically inactive under the Labour Force Survey?

Answer 5

Those who are neither employed or unemployed; those who are not available to work and those who are unable to work.

Question 6

What does the Claimant Count measure?

Answer 6

Records people who are successfully claiming unemployment benefits (Jobseeker’s Allowance).

Question 7

What are the advantages of the Claimant Count?

Answer 7

Cheap and easy to collect data; can be easily updated regularly.

Question 8

What are the disadvantages of the Claimant Count?

Answer 8

Tends to underestimate the number of unemployed people (not everyone wants or is able claims unemployment); figures can be manipulated (e.g. if unemployment benefits become harder to claim, looks like unemployment has gone down).

Question 9

What are the advantages of the Labour Force Survey?

Answer 9

More accurate as survey sent around country, collecting data from real people; internally accepted measure which allows for comparisons.

Question 10

What are the disadvantages of the Labour Force Survey?

Answer 10

Expensive and time consuming to run; only update annually; just a sample, not the whole population of a country so figures are only an estimate.

Question 11

What is the ‘hidden unemployed’?

Answer 11

Working part time but would like to work full time; on government training schemes who would prefer employment; classed as sick or disabled; who aren’t actively seeking a job but would take a job if offered, or are in education because they can’t get a job.

Question 12

What is the Labour Force?

Answer 12

People of working age who are willing or are able to work in a country; it is everyone who would work if there were limitless jobs.

Question 13

What is unemployment in economic terms?

Answer 13

People of labour force who are willing and able to work and actively seeking a job but are not currently employed.

Question 14

Why is careful measurement of unemployment important?

Answer 14

Measuring unemployment with care is vital as it informs about spare capacity and helps us determine whether an economy can cope with excess demand.

Question 15

What is underemployment?

Answer 15

People of labour force who are employed but seeking more hours/additional work, which also included those who are in jobs that don’t reflect their skill level.

Question 16

How does underemployment usually increase?

Answer 16

Often increases during recessions as firms will often choose to reduce staff hours, meaning the underemployed have lower incomes.

Question 17

What is economic inactivity?

Answer 17

People of working age who are not available to work and those who are unable to work.

Question 18

How does economic inactivity affect the labour force?

Answer 18

Increases in inactivity will decrease the size of the labour force, causing a fall in the productive potential of the country.

Question 19

What could inactivity also be caused by?

Answer 19

However, inactivity could just be result in more people being unemployed if there are no jobs available to them.

Question 20

What is the employment rate?

Answer 20

The proportion of population working age that is currently employed.

Question 21

What is the unemployment rate?

Answer 21

The proportion of the labour force that is not currently employed.

Question 22

What is the participation rate?

Answer 22

The proportion of a population of working age that is in the labour force, ie. economically active.

Question 23

What is cyclical unemployment?

Answer 23

Where lack of spending in the economy means that people are out of work (e.g. in a recession).

Question 24

What is structural unemployment?

Answer 24

Where industries are in decline and workers’ skills are becoming obsolete, which happens when there is a mismatch between the skills and location of workers and the needs of employers; lack of geographical and occupational mobility.

Question 25

What is frictional unemployment?

Answer 25

Where people are moving between jobs which is temporary.

Question 26

What is seasonal unemployment?

Answer 26

Where people are out of work of some periods of the year.

Question 27

What is real wage unemployment?

Answer 27

Where wages are too high, meaning there is more supplied by those willing to work than demanded by employers.

Question 28

What are some impacts of unemployment?

Answer 28

Decreased incomes which causes declining living standards, causing social problems and alienation as stigma of being unemployed; lower government tax revenue, higher government spending on unemployment benefits; hysterisis as workers might have reduced skills and leave the labour market, reducing profits for firms and the quality of output; additionally, there is a loss of potential national output as there is an inefficient use of scarce resources.

Question 29

What are some impacts of employment?

Answer 29

Increased incomes which causes rising living standards; higher government tax revenue; improved skills which can increase quality of factors of production; though, it can prevent increases in inflation, provides incentive for workers for innovation and employment as well as lower wage rates reducing bargaining power of workers; multiplier effect as increased income and increased spending.

Question 30

What is migration?

Answer 30

Movement of people from one country to another.

Question 31

Why does migration occur?

Answer 31

Occurs when individuals are searching for better paid work or education, escape from social/political unrest, disagree with tax structures or accompany family members.

Question 32

How can migration benefit the economy?

Answer 32

Due to the circular flow of income, immigrant’s spending creates jobs, though it depends on how much money immigrant send back home.

Question 33

What is a downside of migration on wages?

Answer 33

It also leads to lower wages as most of them are willing to supply lower-paid, low skilled jobs.

Question 34

What is emigration?

Answer 34

People exiting one country to move to another.

Question 35

What is immigration?

Answer 35

People entering one country to move from another.

Question 36

How can lack of training lead to unemployment?

Answer 36

As the economy progresses over time, higher skills are needed to work in them. If firms do not train staff, government intervention is needed. As a result, people become long-term unemployed as their skills don’t fit jobs on offer.

Question 37

How can migrant workers address skill shortages?

Answer 37

Migrant workers may fill these shortages if their skills fit.