3.1 B ] Unemployment [D]

Question 1

Types of unemployment ?

Answer 1

1. Seasonal unemployment.
2. Frictional unemployment.
3. Structural unemployment.

Question 2

1. Seasonal unemployment ?

Answer 2

Seasonal fluctuations in unemployment that results from the seasonality associated with some jobs and sectors leads to high demand for workers but workers may be laid off during the slack or off-season peroids.
e.g agriculture.

Question 3

2. Frictional unemployment ?

Answer 3

Frictional unemployment is unemployment that arises from normal labour market turnover.

Question 4

Job search ?

Answer 4

Job search means there must always be some unemployment.

Question 5

Voluntary unemployment ?

Answer 5

Voluntary unemployment is where people choose to remain unemployed rather than take jobs which are available.

Question 6

Involuntary unemployment ?

Answer 6

Involuntary unemployment is where people want work at the going market wage rate but cannot find employment.

Question 7

A ] Job creation ?

B] Job destruction ?

Answer 7

A ] Job creation occurs when businesses grow and when new businesses start-up => increase in job availability.
B ] Job destruction occurs when businesses fail or exit the market, down-size or ratioalize => increase in unemployed workers searching for new jobs.

Question 8

3. Structional unemployment ?

Answer 8

Structural unemployment is unemployment created by changes in tech and international competition that change the skills needed to perform jobs or the locations of jobs.

Question 9

A ] Occupational immobility ?

B ] Geographic immobility ?

Answer 9

A ] Occupational immobility = require skills and experience they do not possess.
B } Geographic immobility = are not in the immediate region where they live.

Question 10

A ] Technology change ?

B } Structural change in the economy ?

Answer 10

A ] Technology change = those that lose out are those whose knowledge, skills and experience are now obsolete.
B ] Structural change in the economy = causes competition from abroad [ cheaper imports ] or by changes in tech and trends.

Question 11

Cyclical unemployment ?

Answer 11

Cyclical unemployment is the deviation of actual unemployment from the natural rate of unemployment.

Question 12

Natural rate of unemployment ?

Answer 12

Natural rate of unemployment is natural unemployment as a % of the labour force.

= the rate of unemployment that does not go away on its own.

Question 13

Full employment ?

Answer 13

Full employment occurs when there is no cyclical unemployment or equivalently when all unemployment is frictional or structural.

= the economy is at full employment is called the natural rate of unemployment.

Question 14

Hysteresis ?

Answer 14

Hysteresis refers to the long-term effects that can occur following a recession or a shock
=> the longer people are without work the less likely they are to be hired by firms.

Question 15

NEET ratio ?

Answer 15

NEET ratio = % of young people not in employment, education or training.

Question 16

A ] Possible reasons for a) increased structural U ?

B } possible reasons for b) higher or prolonged frictional U ?

Answer 16

A ] possible reasons for increased structural U :
i ] The minimum wage
ii ] Trade unions
iii ] Efficiency wages
B ] possible reasons for higher or prolonged frictional U :
iv ] Tax wedges
v ] The social welfare system and the replacement ratio.

Question 17

The replacement rate ?

Answer 17

The replacement rate is the amount of in-work income that is replaced by the social welfare system when an individual become unemployed.

Question 18

Formula for replacement rate %

Answer 18

Replacement rate % = net income while unemployed over net income while employed by x100