2.1.3 Unemployment And Employment Flashcards
What are the two measures of unemployment
- Claimaint count
- ILO
Describe the process of the UK labour survey
- 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
Describe the process of the claimant count
- Simply counts the amount of people which claim unemployment benefits
What is the definition of unemployment
- Those who are of working age and are actively looking for a job however they do not have a job
What are some advantages of the LFS ?
- 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
What are some disadvantages of the LFS
- 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
What are some advantages of the Claimant count
- 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
What are some disadvantages of the Claimant count
- 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
What are the causes disequilibrium unemployment
- Cyclical unemployment
- Structural unemployment
- Frictional unemployment
- Real wage inflexibility
- Seasonal unemployment
Explain cyclical unemployment
- Where the AD is low in an economy which reduces the demand for labour across many industries
When can Cyclical unemployment increase
- 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.
Explain real wage unemployment
- The dis equilibirum of labour causes excess supply of labour
- This then causes this part of labour force to be cut out
Explain frictional unemployment
- 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
Explain structural unemployment
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
Explain seasonal unemployment
- 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
Give a concise definition for structural unemployment
- Immobility of labour due to a long term change in the structure of an industry
What is an occupational immobiltity of labour ?
- Where there is a skills mismatch between S&D for labour and the actual skills of the labour force
What is geographical immobility of labour
- This is where people who are actively looking for work cannot move to places where there are job vacancies and therefore cannot be employed
What are the disadvantages of unemployment
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
What is national debt
- Debt is the total amount owed by the government which has accumilated over the years
What are the benefits of unemployment?
- 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
What are some evaluation points for whether unemployment is beneficial or disadvantageous
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)
