2.1.3 Unemployment And Employment

Question 1

What are the two measures of unemployment

Answer 1

• Claimaint count
• ILO

Question 2

Describe the process of the UK labour survey

Answer 2

• Asks 60-70,00 households to classify as employed, unemployed or economically inactive
• They then calculate an unemployment rate
• This can be calculated as unemployed/economically active x 100

Question 3

Describe the process of the claimant count

Answer 3

• Simply counts the amount of people which claim unemployment benefits

Question 4

What is the definition of unemployment

Answer 4

• Those who are of working age and are actively looking for a job however they do not have a job

Question 5

What are some advantages of the LFS ?

Answer 5

• Due to the same methodology being used in many countries, this can allow inter country comparisons.
• The criteria for assessing unemployment have changed little , so it allows good time series comparisons.
• Provides rich data set of the labour market including regional labour activity

Question 6

What are some disadvantages of the LFS

Answer 6

• Because the sample size is so small, there are bound to lead to some sampling areas, some people who are unemployed may not be counted (margin of error + or - 3%)
• It is costly and time consuming to carry out
• It is only conducted quarterly, therefore rapid changes in the labour market may not be recorded

Question 7

What are some advantages of the Claimant count

Answer 7

• Can be more accurate in the sense that the exact number of people claiming unemployment benefits can be calculated
• Data is produced monthly therefore provides a timely indicator of economic activity

Question 8

What are some disadvantages of the Claimant count

Answer 8

• Difficult to compare between countries as some countries may have different criteria’s to meet in order to claim unemp bens. and some countries may not have them at all
• Many unemployed people may not fit the criteria for claiming unemp bens. such as being under 18
• Some people may be too proud to claim, makes
  it harder to calculate hidden unemployment
• Tends to be weak at finding underemployment

Question 9

What are the causes disequilibrium unemployment

Answer 9

• Cyclical unemployment
• Structural unemployment
• Frictional unemployment
• Real wage inflexibility
• Seasonal unemployment

Question 10

Explain cyclical unemployment

Answer 10

• Where the AD is low in an economy which reduces the demand for labour across many industries

Question 11

When can Cyclical unemployment increase

Answer 11

• When an economy is in recession and the demand for goods and services is low. Therefore workers may be made redundant
• Furthermore it may increase during times of slow growth as businesses may not be able to break even.

Question 12

Explain real wage unemployment

Answer 12

• The dis equilibirum of labour causes excess supply of labour
• This then causes this part of labour force to be cut out

Question 13

Explain frictional unemployment

Answer 13

• This is caused by workers who are either seeking a better job or who are in between jobs
• For example, school leavers joining grad schemes or people seeking promotion

Question 14

Explain structural unemployment

Answer 14

This is mainly caused by a lack of suitable skills for the jobs available . This may be due to reasons such as deindustrialisation.
Immobility of labour

Question 15

Explain seasonal unemployment

Answer 15

• This is where workers may find themselves without a job due to the time of year and the demand for their skills is not needed all year round
• For example fruit picking only needed in the summer

Question 16

Give a concise definition for structural unemployment

Answer 16

• Immobility of labour due to a long term change in the structure of an industry

Question 17

What is an occupational immobiltity of labour ?

Answer 17

• Where there is a skills mismatch between S&D for labour and the actual skills of the labour force

Question 18

What is geographical immobility of labour

Answer 18

• This is where people who are actively looking for work cannot move to places where there are job vacancies and therefore cannot be employed

Question 19

What are the disadvantages of unemployment

Answer 19

1) Lost output
2) Deterioration of gov finances ( rev - VAT and income) more gov on benefits
3) Social cost - riots, healthcare physical and mental and homelessness
4)Other countries demand for exports are harmed
5) HYSTERISIS - Long term, therefore deskilling and they are replaced by better workers

Question 20

What is national debt

Answer 20

• Debt is the total amount owed by the government which has accumilated over the years

Question 21

What are the benefits of unemployment?

Answer 21

• Better pool of workers for firms, can choose the most productive workers out of the working force
• Low inflation due to less spending power of people
• Reduce current account deficit due to lower demands for imports

Question 22

What are some evaluation points for whether unemployment is beneficial or disadvantageous

Answer 22

i) Rate of unemployment, may just be at the normal rate therefore not bad
ii) Duration of unemployment is long term, this may be deadly to an economy due to hysteresis
iii) Type of unemployment ( example : if it is structural, this is worse for the economy than frictional which may even be beneficial)