3.2 Low Unemployment

Question 1

What is the population of working age?

Answer 1

Those between 16-64

Question 2

What is the economically active/ the labour force /workforce?

Answer 2

Those of working age who are willing and able to work

Question 3

What is the economically inactive

Answer 3

People of working age who are not able, and or not willing to work. They are not part of the labour force. This can be due to full time education, stay at home parents, etc.

Question 4

What is the unemployed?

Answer 4

• the part of the labour force without paid work, and actively seeking employment at the going wage rate

Question 5

How to calculate rate of unemployment?

Answer 5

Unemployed / Employed + Unemployed x 100

Question 6

How is unemployment measured in the UK?

Answer 6

1. Labour Force Survey - Based on a quarterly survey of 36,000 UK households
2. The Claimant Count - Measure of those claiming unemployment benefits, called the Job Seekers Allowance

Question 7

What is cyclical unemployment and what is it caused by?

Answer 7

• caused by a lack of aggregate demand in the economy
• if there is a decline in aggregate spending, there is a fall in total demand for goods and services and therefore as labour is derived, less workers are needed
• those who are unemployed now have lower income which leads to lower aggregate spending

Question 8

What is the policy solution for cyclical unemployment?

Answer 8

Boost aggregate spending, this can be done by expansionary fiscal or expansionary monetary policy

Question 9

What is structural unemployment and what factors are affecting it

Answer 9

• caused by changes in the structure of the economy over time, for example a decline in manufacturing and expansion of service sector
• example of factors include a permanent reduction in demand for a particular good or service, technological improvements and firms moving production overseas
• due to labour immobility leads to high levels of unemployment in regions where industries were located

Question 10

What are some policy solutions for structural unemployment?

Answer 10

• provide subsidies to employers in regions with high levels of unemployment
• improve labour mobility to increase the productive capacity of the economy

Question 11

What are the 2 types of labour mobility?

Answer 11

• occupational mobility - the ability or willingness of workers to move between jobs into new industries
• geographical mobility - the ability or willingness of workers to move between regions

Question 12

What is frictional unemployment?

Answer 12

• This type of unemployment is defined as occurring when workers are between jobs and searching for a new position
• typically short term

Question 13

What is Seasonal Unemployment?

Answer 13

• caused by a seasonal variation of demand in certain industries or sectors of the economy, e.g construction, tourism and agriculture

Question 14

What are the benefits of unemployment?

Answer 14

• More Job Flexibility
• Employers have a wider range of workers ‘
• Lower Wage Costs for producers

Question 15

What are the costs of unemployment?

Answer 15

• Loss of income so lower standard of living
• Lower GDP
• Lower income leads to lower AD so cyclical unemployment rises
• Larger budget deficit due to increase in benefits
• Region specialisation means if one industry has structural unemployment the whole region will be affected

Question 16

What can be used to evaluate unemployment?

Answer 16

1. The cause of the unemployment
2. The type of unemployment
3. The size of unemployment
4. The duration of the unemployment
5. The level of mobility workers ahve