2.3 Unemployment

Question 1

What is the definition of economically active ?

Answer 1

• economically active (labour force): those of working age who are willing and able to work. This includes people who are employed and unemployed

Question 2

What is the definition of economically inactive ?

Answer 2

Economically inactive: people of working age who are not able or not willing to work, not part of the labour force e.g people in full-time education

Question 3

What is the definition of unemployed ?

Answer 3

Unemployed: the part of the labour force without paid work, available for work and actively seeking employment at the current wage rate

Unemployment rate = (unemployed / labour force) x 100
Employment rate = (employed/population of working age) x 100

Question 4

What is the definition of underemployed ?

Answer 4

Underemployed: workers who are in paid work (employed), but experiencing a lack of enough paid work or work that does not make full use of skills

Question 5

What is the Labour force survey (LFS) ?

Answer 5

• Based on a quarterly survey of a sample of 25000 UK households
• in this measure the level of unemployment is the total of those of working age who declare to be out of work, have looked for work in the past month and are able to start work within 2 weeks

Question 6

What are the advantages and disadvantages of LFS ?

Answer 6

Advantages:
- wide measure thought to give more accurate measure of unemployment compared to claimant count
- LFS in internationally comparable measure
Disadvantages:
- relatively costly to administer
- samples may be unrepresentative and subjective to response errors and low response rates
- time lags in data

Question 7

What is the claimant count ?

Answer 7

• the claimant count is a measure of those claiming unemployment-related benefits. Includes job seekers allowance and out of work universal credit

Question 8

What are the advantages and disadvantages of the claimant count ?

Answer 8

Advantages:
- easy to collect as it is a simply a tally of those receiving unemployment benefits
- relativity cost less to obtain
Disadvantages:
- heavily influenced by eligibility rules
- there may be fraudulent claims

Question 9

What is frictional unemployment ?

Answer 9

frictional unemployment is short-term unemployment occurring when workers are out of work and are between jobs
- search unemployment: unemployed workers take time to find suitable, or most appealing jobs
- casual unemployment: those who work on an occasional basis may be between periods of employment e.g actors
- seasonal unemployment: those who work in seasonal industries may be unemployed when demand is low e.g workers in tourist areas

Question 10

What is structural unemployment ?

Answer 10

structural unemployment is caused by workers losing jobs due to the change in the structure of an economy, because of changes in patterns of economic activity
- regional unemployment: caused by decline of certain industries, concentrated in geographic areas e.g decline in mining in S Wales
- technological unemployment: if workers lose their jobs due to technological advances e.g AI
- international unemployment: due to outsourcing where labour is cheaper

Question 11

What is cyclical unemployment ?

Answer 11

cyclical unemployment occurs due to a lack of aggregate demand (AD). When an economy experiences a downturn in economic activity (e.g a recession), unemployment increases
This occurs when total supply of labour is greater than the total demand for labour at the going real wage rate in the short-run