2.1.3 - Employment & Unemployment Flashcards
What Does Being Unemployed Mean?
(2 Points)
~ Those of the working age, who are willing and able to work, actively seeking work but who don’t have a job.
~ Between the ages of 16 -> 65.
What Are The 2 Measures Of Unemployment?
~ Labour force survey (ILO).
~ Claimant count.
What Is The Labour Force Survey (ILO)?
(5 Points)
~ Is the headline measure for most countries.
~ Survey conducted by the ONS, they are asked questions.
~ From the data collected the ONS can work out the number of employed, unemployed and economically inactive.
~ From this data the unemployment rate can be calculated.
~ Same survey is used globally, so it’s useful for making international comparisons.
What Are The Issues With The Labour Force Survey (ILO)?
(2 Points)
~ Sampling errors, as they amount they calculate is no where near the amount of people working.
~ Expensive, to conduct the survey and all the processes after.
How Do You Calculate The Unemployment Rate?
Unemployed / Economically Active x 100
What Is The Claimant Count?
Measure of the total number of people who are claiming unemployment benefits, such as JSA.
What Are The Issues With The Claimant Count?
(4 Points)
~ Difficult to compare between countries, as some countries might not even have unemployment benefits, conditions to claim them might be different.
~ Not everyone who is unemployed would claim it, so would not be an accurate figure.
~ Not everyone is able to claim it, as there might be strict conditions to claim it.
~ Could be subject to fraud.
What Is Meant By The Economically Active?
The employed and underemployed.
Describe Underemployment
(4 Points)
~ Are those people who are in flexible working contracts, when they would prefer to be in full time work.
~ Are those people who are working a job that requires lower skills than they have.
~ They are not included in any unemployment statistics.
~ Could be a consequence of structural unemployment.
What Are The Types & Causes Of Unemployment?
(5 Points)
~ Structural unemployment.
~ Seasonal unemployment.
~ Cyclical / Demand deficit unemployment.
~ Frictional unemployment.
~ Real wage inflexibility unemployment.
What Are The 2 Groups Of Unemployment?
~ Disequilibrium.
~ Equilibrium / Natural rate of unemployment.
What Type Of Unemployments Occur When The Labour Market Is In Disequilibrium?
(2 Points)
~ Cyclical / Demand deficient unemployment.
~ Real wage inflexibility unemployment.
What Type Of Unemployments Occur When The Labour Market Is In Equilibrium?
(3 Points)
~ Structural unemployment.
~ Frictional unemployment.
~ Seasonal unemployment.
Describe Cyclical / Demand Deficient Unemployment & Draw The Graph Relating To It
Occurs in a recession, when there is a lack of AD in the economy.
Describe Real Wage Inflexibility Unemployment & Draw The Graph Relating To It
(6 Points)
~ Occurs when wages are forced above equilibrium in the labour market, creating an excess supply of labour.
Graph:
~ When wages are forced above equilibrium, firms are less willing and able to employ, contracting labour demand (Q* -> QD).
~ But workers are willing and able to work at higher wages, expanding labour supply (Q* -> QS).
~ Difference between QD -> QS is the excess supply of labour and the real wage unemployment.
Caused By:
~ Governments intervention with high minimum wages.
~ Strong trade unions that bring wages up.
Describe Structural Unemployment
(9 Points)
~ Immobility of labour due to a long term change in the structure of an economy.
~ Is a serious form of unemployment.
Occupational Immobility Of Labour:
~ Skills mismatch between skills the workers have and job vaccines that exist.
Geographical Immobility Of Labour:
~ Workers are not willing or able to physically move to where job vacancies exist.
These Immobilities Occur Due To A Long Term Change In The Structure Of An Industry:
~ Technology advancements, automates physical jobs and replaces the need for physical labour.
~ When an industry looses its comparative advantage, causing industry decline and structural unemployment.
~ Modernisation causing a need for new skills, workers must possess.
~ Economies transitioning from one sector to another
~ Education system may not be keeping up with the skills needed in the economy.
Describe Frictional Unemployment
(2 Points)
~ Occur when workers are in-between jobs.
~ E.g. A worker is voluntarily quick their existing job, looking for a better job.
Describe Seasonal Unemployment
(2 Points)
~ Occurs as certain seasons come to an end, labour is not required until the next season.
~ E.g. Ski instructors or summer seaside resort workers.
What Is The Significance Of Migration On Employment & Unemployment?
(4 Points)
~ Immigrant fill vacancies that local citizens cannot. E.g. Manual labour, dangerous labour and low-skilled labour.
~ Increased supply for labour, may push down wages in the economy, disincentivising people to work, increasing unemployment.
~ Immigration results in an increased population, increasing consumption in the economy.
~ Immigrants can displace some local workers, increasing unemployment.
What Are The Effects Of Unemployment On Firms?
(3 Points)
~ Loss of output and production.
~ Loss of sales revenue.
~ Changes in the skill level of the economy, making it harder to employ people with the correct skills.
What Are The Effects Of Unemployment On Individuals?
(4 Points)
~ Loss of income and skills.
~ Health issues.
~ Sense of failure.
~ Social deprivation.
What Are The Effects Of Unemployment On The Government?
(3 Points)
~ Increased spending on benefits, incurring an opportunity cost.
~ Less tax revenue.
~ Increased spending on retraining and society costs.
What Are Benefits Of Unemployment?
(4 Points)
~ Greater pool of workers for firms to choose from.
~ Low inflation, as there is abundant labour workers would not have huge wage bargaining power, keeping a lid on wage rises, cost of production and overall price rises.
~ Improved current account position, as they would be less spending on imports due to lower incomes.
~ Time for workers to find suitable jobs,, increasing happiness.
What Are The Costs Of Unemployment?
(4 Points)
~ Lost output.
~ Deterioration of government finances.
~ Social costs.
~ Lost income.
