3.2 Employment and Unemployment Flashcards
WHat is the claimant count?
number of people officially claiming unemployment related benefits - must be actively seeking work
What is the labour force survey?
all those actively seeking and available for work, whether or not they are claiming benefits
What is long term unemployed
people unemployed for at least one year
what is full employment
when there is enough unfilled job vacancies for all the unemployed to take work
What are discouraged workers?
people out of work for a long time who may give up on job search and effectively leave the labour market
What does economically inactive mean?
thosw who are of working age but are neither in work nor actively seeking paid work
What does employment rate mean?
the percentage of the population of working age in full time or part time paid work
What does unemployment rate mean
percentage of the economically active population who are unemployed
What are zero hours contracts?
workers on call and do not get a quaranteed number of working hours
What is the natural rate of unemployment ?
rate of unemployment when the labour makret is in equilibrium. it is caused by supply side factors rather then demand side
Give determinants of natural rate of unemployment
- availability of job information
- level of benefits
- skills + education
- degree of labour mobility
- felxibility of laboru market
What are the consequences to the economy of unemployment?
- waste of human capital and lost output (low LRAS)
- reduced international competitiveness (reduces incentives for firms to invest, leads to increased export competitiveness)
- increased gov spending
- lost tax revenue
What are the consequences to firms of unemployment ?
- reduced demand for goods and services
- less incentive to invest
- higher business taxes
What are the consequences to the unemployed of unemployment?
- lower living standards
- social costs
- financial costs
- de-skilling
- reduced chances of finding work
What is frictional unemployment?
unemployment that is usually short term and occurs when a worker switches between jobs
What are the assumptions about frictional unemployment?
- a job vacancy exists
- friction in the labour market prevents the unemployment from filling vacancy
- number of unfilled job vacancies can be used as a measure of the level of frictional unemployed
What is structural unemployment ?
- occurs when the demand fro labour is less than the supply of labour in an individual labour market
long term unemployment results from structural decline of industries due to … ?
- decline of manufacturing
- occupational immobility
- geographical immobility
- robotics replacing jobs
- long term regional decline
What are some barriers to successfully getting new jobs/
- may require specific skills
- jobs need additional training which could be costly
- high cost / availability of childcare
- cost of commuting to work
- unaffordable housing
What can labour immobilities lead to?
structural unemployment
What does geographical immobility of labour mean?
barriers that prevent people moving from one area to another to find work
What are some good reasons why geographical immobility might exist ?
- family and social ties
- financial costs involved in moving homes
- high costs of renting properties
- differance in cost between regions
What is the occupational immobility of labour?
- inability of labour to switch between differant occupations
What is the impact of automation?
- mechanism:workers operating machines , increases overall demand for labour
- automation lessens the demand for labour as machines operate
What is cyclical unemployment ?
linked to economic cycle, indicates that demand is low
What is seasonal unemployment?
- occurs when workers are laid off on a short term basis at certain times of the year
What does real wage mean?
the purchasing power of the money/ nominal wage
What is real wage employment ?
is unemployment caused by real wages being stuck above the equilibrium real-wage
What four factors effect money wage rigidity?
- money illusion
- wage fixation through contracts ( cannot change wage through contracts )
- minimum wage laws ( intervention by the Gov in fixing minimum wages)
- efficiency wages ( employers not interested in lowering wages as high wages make workers more efficient and productive)
How does money illusion cause money wage rigitity?
workers will resist any move for for cut in money wages though they might accept fall in real wages brought about by rise in prices of commodities
What are the benefits of falling unemployment ?
- increased employed (boosts real GDP, lifts living standards)
- more people in work (extra tax revenues for gov)
- social costs of high unemployment are severe
What are the drawbacks of falling unemployment?
- extra spending for expanding labour market might worsen current account
- risk of an acceleration in demand pusn and cost push inflationary pressures
- fewer spare labour will mean a rise in unfilled vacancies
How has globalisation effected employment in the UK?
-competition from low cost economies led to decline in Uk manufacturing
What are the economic and social consequences of youth employment ?
- young people out of work risk a permanent fall in expected lifetime earnings from work
- harder to start saving regularly
- increased risk of social alienation
- health impact including consequences for mental health
What are some of the causes of high youth unemployment?
- skills gaps ( employers may not be willing to employ people who lack reading and writing)
- reluctant employers ( may prefer older more experianced workers)
- falling retirement rates ( declining pension incomes means fewer jobs for younger people)
- weak macro fundamentals
What are policies to reduce unemployment through the increase of labour demand?
- macro stimulus policies
- cutting the cost of employing workers
- competitiveness Policies
How can macro stimulus policies increase labour demand ?
- low interest rates and policies to increase business lending
- depreciation in the exchange rate
- infrastructure investment projects
How does cutting the cost of employing workers increase labour demand?
- reductions in national insurance contributions
- financial support for apprenticeship programs
- extra funding for regional policy
how does competitive policies increase labour demand?
- reductions in coorporation tax
- tax incentives for research/ innovation spending
- enterprise policies to lift the rate of new business start ups
What are the three policies to increase labour supply?
- reducing occupational mobility
- improving geographical mobility
- stimulate stronger work incentives
How does reducing occupational mobility increase labour supply?
- better funding an more effective training
- teaching new skills
- expansion of apprentiships/ internships
How does improving geographical mobility?
- rise in house building wil help to keep property prices lower and encourage more affordable rents
- active regional policy to create new jobs and businesses
How does simulating stronger work incentives increase labour supply?
- higher min wage
- reduction in income tax
- welfare reforms to reduce the risk of poverty trap
