2.1.3 Employment and Unemployment Flashcards
What is the official measure of unemployment in the UK
Labour Force Survey
What is the labour force survey
- Asks around 60,000 households to self-classify as either employed, unemployed, or economically inactive
Definition of unemployed
Without a job
Want a job
have actively sought work in the last 4 weeks
are able to start work within the next two weeks
What is the claimant Count
Simply counts the number of recipients of Job Seeker’s Allowance added to those who muct be looking for work in order to clain universal credit
In 2018, how many and what percentage of people where umemployed
- 38 million
- 1%
After the 2008 economic downturn the % of unemployment was what, in 2011
8.5%
3 Advantages of the labour force survey
- same methodlogy that is used in many contries, which allows inter contry comparision
- The criteria for assessing unemployment has changed very little over time, so allows a good quality time-serise comparison
- Provides a very rich set on many aspects of labour market
Disadvantages of the Labour force survey method
- Only survey 60,000 households, there will be sampling error
- Costly + Time-consuming to carry out
- Only conducted quarter, so may not pick up on changes in the labour market quickly
Advantages of the claimant Count measures of unemployment
- Accurate in the snese that the exact number of people claiming unemployment benefits can be calcualted - wthis can make it inexpensive measure
- Easy to classify who is actively seeking working and who is not
- Easy to see regional/ local unemployement patterns
- Data is produced monthly
Disadvantages of Claimant Count
- There are a lot of people who do not meet the criteria for collecting unemployment benefits
- People may be too pround to claim
What is long term unemployment
People who have been unemployed for at least a year
What is the Labour Force
The number of people of working ages who are able, available and willing to work
What is full employment
When there is enuough unfilled jobs vacancies for all the unemployed to take work
What is a discoraged worker
People out of work for a long time who may giv up on job search and leave the labour market
What does economically inactive mean
Those who are of working age but are neither in work nor actively seeking paid work-note that the economically inactive are not counted as unemployed
What is employment rate
The percentage of the population of working age in full-time or part paid work
Unemployment rate
Percentage of the economically active population who are unemployed
What is Wage inflexibility
The inability of wage change.
inflexibility of wages to fall
What is under-employment
- Looking for an extra job or actively searching for a new job with longer hours
- Preferring to work longer hours in their job
- Under-utilised in terms of their ability/qualifications/experience
In October 2018 , what was the employment rate
75.7%
16-64 yr olds
What are the 5 causes of unemplyment
Cyclical
Structional
Seasonal
Frictional
Wage inflexibility
Describe Cyclical (demand Deficient) unemployment
Where does it derived from
When can it rise
- caused by weak aggregate in the economy, reducing the demand for the labour economy
- When aggregate demand falls, this will cause contraction in national output and some businesses may make worker redundant
- Demand for labour is derived from demand for ( and spending) good/services
- Rise quickly in a recession, but it can also increase in a period of slow growth
Describe frictional unemployment
Who does it effect
And how can it be reduced
- Workers seeking a better job or who are in-between jobs
- Also effects new entrants of the labour market like graduates
- There is always frictional unemployment
- It can be reduced by making information on jobs more widely available and making job search more affordable
Describe structural unemployment
What can it be caused by
And how does the unemployment trap link to this
- Mainly caused by lack of suitable skills for jobs available, from de-industrialisation or structural changes in an economy
- This can caused by occupational immobility and geographical immobility
- Often people remain unemployed because of disincentives effects like the unemployment trap
What is the unemployment trap
Situation in which there is little financial incentive for someone who is unemployed to start working because the combined loss of welfare benefits and need to pay income tax and other dircts taxes might result them being worse off
Child care costs can also be a barrier
What is seasonal unemployment
Occurs when seasonal workers are without jobs due to the time of year where there are seasonal changes in unemployment
Seasonalities refers to fluctuations in output and sales related to the seasons of the year. Most products will have peaks and throughs in production or sales
Give examples of seasonal unemployment
- Farming
- Tourism
- Retailing
- Hospitality
Neoclassical economics assume what about all prices and wages
How can this not anlways be the case
assume that all prices and wages can easily adjust up or down to reach a new equilibrium, if demand and/or supply changes in product makrets and labour markets
This is not always the case if there is Gov intervention in labour market, or the market has other imperfections i.e. classical unemplyment
What can classical unemployment include
The existence of trade unions, with bargaining power to push wages up, leaving wages higher than free market equailibrium casuing supply of labour to be greater than demand
Existance of minimum wage, in theory set above free market equilibrium causing supply of labour to be greater than demand
Existence of monopsony employers causing employment to be lower than free market equlibrium (single employers fof a particular type of labour)
Reasons for economic inactivity
- Students remaining in full-time education/training
Looking after familiy or home
Long term sick/chronic illness
Retired including those who have retired early
Discouraged workers who have given up the active search for work
Long term unemployment, is an effect of what type of unemployment
Structural problemt in the labour market
Why would the longer people are out of unemployment, would it become harder for them to find their way back into employment
People’s skills tend to worsen due to economic activity
Motivation to search for a job also suffers the longer someone is out of work
Employmers often favour people with consistent record of being in work rather than those who have gaps in their CV
Name 6 Economic/Social effects of unemployment
- Slower long-run trend rate of ecnomic growth
- Risks of a period of price deflation because of falling aggregate demand
- Rising income inequality
- Erosion of people’s skills arising from long-term unemployment
- Fiscal (budget) cost to the Gov as tax revenues shrink and welfare spending increases
- Externalities from social problems
What three impacts of unemployment, can make it hard for people to get back into employment
- Loss of work experience
- depreciation of skills, Gaps in CV and quaility of human capital
- Loss of Current and Future Income
- vunrability of high debt of the unemployed as high intrest rates, decline in physical, social and emotical health making people less likely to find work
- Chaning pattern of jobs in the economy
- New jobs occurs as old ones are old ones are no longer needed, causing strucutral unemployment
What are the 6 polices to reduce unemployment
Identify which ones improve labour supply and which ones labour demand
- Macro Stimulus Policies (+ possible positive multiplier effect) (Labour demand)
- Cutting cost of employing extra workers (labour Demand)
- Competitivness Policies (Labour demand)
- Reducing occupational mobility (Labour Supply)
- Inproving geographical mobility (Labour Supply)
- Stimulate stronger work incentives (Labour Supply)
Explain the Macro Stimulus Policy to reduce unemployment
- Low intreset rates + improving credit supply to businesses
- Depreciation in the exchange rate (help exporters)
- Infrastructure investment projects (fiscal policy)
Explain cutting costs of employing extra workers to reduce unemployment
- Reductions in the rate of national insurance contributions
- Financial support for aprenticeships/paid interships
- Extra funding for regional policy - special economic zones
Explain Competitivness policies to reduce unemployment
- Reduction in corporation tax (to increase investment)
- Tax incentives for research/innovation spending
- Enterprise policies to encorages new business start-ups
Explain reducing occupational mobility to reduce unemployment
- Better funding for and more effective work training
- Teaching new skills
- An expansion of apprenticship/intership programms
Explain Improving geographical mobility to reduce unemployment
- Rise in house-building to keep property prices lower and encorage more afforable housing rents
- Active regional policy to improve transport infrastructure
Explain Stimulating stronger work incentives to reduce unemployment
- Higher minimum wages
- Increase tax-free allowance on salaries
- Welfare reforms to help reduce the risk of the poverty trap
Which 3 countries in the European Unions had the highest empoyment rates (% of the labour force) in 2019
Germany (3.1%)
Hungary (3.4%)
UK (3.7%)
3 Economic and social benefits of falling unemployment
- Increased employment - which the increases real GDP and helps to lift living standards and demand
- More people in work - creates extra tax revenues for GOV used to lower budget deficit/ increase spending (G)
- Social cost of high unemployment are severe, which stops this
3 Potential disadvantages of falling unemployment
- Extra spending from expanding labour market might worsen the current account
- Risk of acceleration in demand-pull and cost-push inflationary pressures if unemployment falls rapidly
- Fewer spare labour means a rise in unfilled vacancies; labour shortages might put off some inward investment
- In what 2018 was x% of people in the UK had been born abroad
- EU migrants accounted for y million people in UK workforce
- Non-EU migrants accounted for z million people in the UK workforce
x=17%
y= 2.2 million
z= 1.2 million
The impact of migrant worker on a labour force will depends 3 factors
- Migrant skills
- Skills of exisiting ‘native’ workers
- The Characteristics of ‘host’ economy
When the UK is compared to all foregin born migrants, what percentage of high to low skills is taken up by each group
UK: high=28% Low=10%
All foregin born: high=30% Low= 15%
Overqualification: by birth country, 2018, the % of highly-educated workers in low and medium skilled jobs
Which 3 contries is this lowest in
UK = 23 %
EU-14 = 23%
East & SE Asia = 26%
