2.5.4 employment and unemployment Flashcards
What does it mean to be underemployed?
Those who have a job but their labour is not used to its full productive potential.
For example, those in part time work but are looking for full time jobs.
What are the 2 main measures of unemployment in the UK?
- The Claimant Count
- The International Labour Organisation (ILO) and the UK Labour Force Survey (LFS)
What is the Claimant Count?
It counts the number of people claiming unemployment related benefits, such as Job Seeker’s Allowance (JSA). They have to prove they are actively looking for work.
Why is the Claimant Count not so reliable?
Not every unemployed person is eligible or bothers to claim for JSA.
Those with partners on high incomes won’t be eligible, and so overall the method underestimates the level of unemployment.
What is the LFS?
It is a survey taken on by the ILO (International Labour Organisation).
What does the LFS ask? [3]
If they meet the following criteria:
- Been out of work for 4 weeks
- Able and willing to start working within 2 weeks
- Workers should be available for 1 hour per week. Part time unemployment is included.
Why does the LFS give a higher unemployment figure than the Claimant Count?
As part time unemployed are less likely to claim unemployment benefit.
What is geographical immobility of labour?
The obstacles which prevent labour from moving between areas. For example, due to family and social ties, financial costs of moving, imperfect market knowledge and regional variations in house prices and living costs across the UK.
What is occupational immobility of labour?
The obstacles which prevent labour from changing their use. For example, labour might find it difficult to change the occupation, such as the UK with the collapse of the mining industry. Workers did not have transferable skills to find other work.
What is meant by the flexibility of the labour market?
How willing and able labour is to respond to changes in the conditions of the market. It is important for labour to be able to adjust to changes in demand, and is vital for the supply-side of the economy.
What is structural unemployment?
Occurs from industrial reorganisation, typically due to technological change. It arises from a mismatch between skills workers possess and skills demanded by employers.
The coal and ship building industries in the UK led to large structural unemployment.
How do geographical and occupational immobility of labour worsen structural unemployment?
If workers don’t have transferable skills to move to another industry, or if it is not easy to move somewhere jobs are available then those facing structural unemployment are likely to remain unemployed in the long run.
How does globalisation contribute to structural unemployment?
Since production in manufacturing sectors move abroad to countries with lower labour costs. This means that workers trained for these jobs will become unemployed.
What is cyclical unemployment?
Caused by lack of demand for goods and services, and it usually occurs during periods of economic decline or recessions.
Firms are either forced to close or make workers redundant as their profits are falling due to decreased consumer spending.
How can increases in productivity increase cyclical unemployment?
As each worker can produce a higher output, meaning fewer workers are needed to produce the same quantity of goods and services.
What are the impacts of unemployment on consumers? [2]
- Have less disposable income + standard of living may fall as a result
- Psychological consequences of losing a job, affecting mental health of workers
What are the impacts of unemployment on firms? [4]
- Firms have a larger supply of labour to employ from, causing wages to fall and could reduce their costs
- Consumers have less disposable income, and so consumer spending falls so firms may lose profits.
- Producers which sell inferior goods might see a rise in sales
- Might cost firms to retrain workers, especially if they have been out of work for a long time
What is the impact of unemployment on workers?
There is a waste of workers’ resources, they could also lose existing skills if not fully utilised.
What is the impact of unemployment on society? [2]
- An opportunity cost to society since workers could have produced goods and services if they were employed
- Negative externalities in form of crime and vandalism, if unemployment rate increases
What are the types of unemployment?
- Frictional (between jobs)
- Structural (immobilities in labour market)
- Geographical (immobility of labour)
- Seasonal (less work in ‘off-season’)
- Cyclical (economic slowdown)
