3 Unemployment Flashcards
What are some definitions required for unemployment
Employed - people who work
Unemployed - not employed, want to work and actively looking for a job (able and available for one)
Economically inactive - not employed, not unemployed
What are reasons for economic inactivity?
Student
Looing after family
Temporary illness
Long term illness
Discouraged workers
Retired
What are some patterns of unemployment
-Movements in and out employment common
-Over 1/3 unemployed are recent entrants into the l abour force
-Half of unemployment spells end when the person completely leaves the labour force and becomes economically inactive
Some of these people want to work - often discouraged workers who give up.
- MAy be due to long term illness which prevent peoplf rom working even if they’d like to
What are some rates needed to learn for unemployment?
Labour force = number employed + number unemployed
Unemployment rate = percentage of labour force unemployed = number of employed / labour force x 100
- Economic inactive not in labour force so do not impact unemployment rate
Labour force participation rate:
- Percentage of total adult population in labour force
= Labour force/adult population x 100
- Was 80% in January 2020
What is the recent effects of women in the labour supply?
- New tech reduecd amount of time to complete routine household tasks
- Improved birth control, reduce fertility rates
- changing political and social attitudes
Fall in mens labour force participation - younger men stay in school longer, older men retire earlier and live longer - with more women employed more stay at home dasd
What are the 2 ways to measure unemployment?
- Claimant count: number of people claimining unemployment benefits relative to number of people paying income tax
- Subject to change in who is eligible for benefits and not precise - excludes people over 55 and mums even if they are looking for a job - LAbour force survey - asks people directly
What are some stats for differences in unemployment
Unemployment rate: UK males 5.4%, females 4.7%
In EU - Greek youth unemployment 38% and UK 11% - lowest in Czech Republic/Germany with 6%
What is the natural rate of unemployment
Rate at which unemployment rate fluctuates - doesnt go away even in the long run however may be changes
What is cyclical unemployment
Following business cycle, deviation from natural rate
What is structural unemployment? Policy to combat it?
results from jobs available in a labour market being insufficient to provide a job for everyone who wants one
- Caused by number of factors, includes minimum wages
Policy:
- May reduce real wages
- Reduce duration of unemployment insurance (force search harder, work at lower wages)
- Lower NMW - easier to hire and fire workers, increased flexbility
- Not a major concern though - participation rate and long term illnesses are bigger concerns
What is frictional unemployment? Policies to combat it?
Takes time for workers to find jobs matching preferences and skills
- Regional changes
- Changes in competition or industries - jobs disappear, new ones born
- Economy always changing, job destroyed/created always
Policy:
- Reduce time taken to find jobs or retrain those who lack skills in demand
- Employment agencies e.g. job centres
- Public training programmes e.g. apprenticeships
What is search unemployment?
Changes in the economy leading to unemployment, takes long time for workers and employers to match
- In some cases, skills may no longer be in demand which then means they must acquire new skills
What is the effect of minimum wage laws?
- Creates excess demand on the Ql against wage curve, pretty simple tbh
Higher Qs, smaller Qd so surplus labour - unemployment
Here wage supply and demand balance is We, the equilibrium wage
- Labour supplied and demanded both equal to Le
When wage is forced above quilibrium, the quantity of labour rises and labour demanded falls, creates surplus labour
What is the effect of Unions?
Bargain wages, benefits and working conditions:
- Estimated 10-20% increase in wages
- Less flexbility - hard to lower salaries, hard to fire workers, etc.
This creates similar effect to NMW, wage above equilibrium
- Unemployed worse off
- Employed better off
So are they bad for economy?
- Necessary to market power of firms that hire workers - wihout, firms pay lower wages and offer worse working conditions
- Unions help firms respond efficiently to workers concerns, keeping happy and productive workforce
