3.2 Low Unemployment

Question 1

employment

Answer 1

use of labour in the economy to produce goods and services

Question 2

unemployment

Answer 2

when workers willing and able to work at the current wage rates are unable to find employment

Question 3

Claimant Count

Answer 3

method of measuring unemployment according to the number of people who are claiming unemployment-related benefits

Question 4

(level of unemployment)

Answer 4

number of people in the working population who are unemployed

Question 5

(rate of unemployment)

Answer 5

% of that country’s workforce that is unemployed

Question 6

calculate unemployment rate

Answer 6

unemployment rate = (number of unemployed/workforce) x 100%

Question 7

frictional unemployment

Answer 7

unemployment caused by time lags when workers move between jobs (necessary as it takes time for labour market to match job vacancies to those who are looking for work)

Question 8

seasonal unemployment

Answer 8

unemployment caused by a fall in demand during a particular season, e.g. tourist industry tends to employ many people in summer months

Question 9

structural unemployment

Answer 9

unemployment caused by a permanent decline of an industry/industries

Question 10

cyclical unemployment

Answer 10

unemployment caused by a lack of aggregate demand, e.g. recession

Question 11

Benefits of unemployment?

Answer 11

1. economy needs to have some frictional unemployment as workers move between jobs = labour mobility, as can fill vacancies elsewhere
2. advantageous to firms as keeps wage rates down due to excess supply of labour
3. lowers costs for firm + makes them more competitive - helps them compete on an international sale

Question 12

Costs of unemployment to individuals?

Answer 12

1. lower living standards: lose jobs = lose wages - unemployment benefits may be much lower than prev wage = hardship + lower QoL
2. relationships breakdown within families, as the now unemployed individual may suffer loss of status + self esteem
3. excluded workers - unemployed for so long, are now unemployable - excluded from workforce and become economically inactive
4. higher direct taxes to raise revenue to support increased number of unemployed - greater unemployment level = greater costs

Question 13

Costs of unemployment to government?

Answer 13

1. wasted labour resources: economy could be producing more goods and services = not at full capacity
2. chain reaction: cyclical unemployment leads to more unemployment - associated with a recession - gov will have to intro new policies to combat this
3. budget deficit: gov spends more than receives in tax revenue - has to spend more on unemployment benefit but also receives less from tax = deficit!

Question 14

Costs of unemployment to regions?

Answer 14

1. unemployment = often spread unevenly throughout the country - some ares tend to suffer more than others and may become ‘depressed areas’ = cyclical unemployment + is above national average - can lead to more crime, emigration, plummeting property prices