3.3c unemployment

Question 1

low employment - meaning and measurement

Answer 1

someone is considered unemployed if they are
* actively looking fro a job
* currently withoug a job

Question 2

unemployment rate measurement

Answer 2

is calculated as the percentage of the labour force (employed +unemplyed) who are unemployed.
formua: unemployment rate =(no. employed/labour force)x100

Question 3

labour force

Answer 3

1. actively seeking work
2. within working age
3. employed.

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Question 4

difficulties of measuring unemployment

Answer 4

official statistic may underestimate or overestimate true unemployment.

Question 5

reasons the official unemplyemnt statistic may underestimate true unemployment

Answer 5

1. population includes discouraged workers. - individuals who would like to work and would accept a job offer but stopped actively seeking as they have remained unemployed for too long and their past search efforts were unfruitful. therefore, they demonstrate no effort in seekign emplyment and therefore are not considered underemployed and not incl in official unemplyment stats.
2. some individuals are underemployed. e.g. involuntary part time workers who do have a job - therefore considered employed but working less hours than desired. or workers who do not fully utilise their skills or experience so htey may be overqualified for the job they hold.

Question 6

hidden or disguised unemployment

Answer 6

refers to underemplyed individials and and discouraged workers.

Question 7

reasons the official unemplyemnt statistic may overestimate true unemployment

Answer 7

1. some individuals may intentionally conceal their true employment status, either fearing loss of transfer payments such as unemplyment benefits that are granted only to the unemployed, or to avoid paying income taxes.
2. some indivs are employed in **illegal activities **and report that they are unemployed.

Question 8

official unemployment stats does not reveal the disparities between

Answer 8

1. different regions of the country
2. female and male unemployment rates
3. different ethnic of religious groups
4. different age groups.

Question 9

youth unemployment

Answer 9

refers to unemployment among workers aged between 15 to 24 and is typically the unempoyment category with the highest rate.

Question 10

types of unemployment (4)

Answer 10

• seasonal unemployment
• frictional unemployment
• cyclical (demand deficient) unemployment
• structural unemployment

Question 11

seasonal unemployment

Answer 11

is a result of unavoidable and predictable variations in the demand and supply of labour
e.g. weather patterns, seasonal temp jobs etc.

this type is expected and govt cant do much abt it - monthly stats are corrected (seasonally adjusted) so policymakers can determine true changed in unemployment, not those due to seasonal factors.

Question 12

frictional unemployment (definition - nature - solution to reduce)

Answer 12

refers to people who are between jobs as it takes time to match a job-seeker w an available job vacancy.

short term in nature and is largely unavoidable in an economy since people will alw voluntarily switch jobs, searching for better ones, or choosing to relocate.

faster and better information related to the labour market will decrease but not eliminate friction unN. govt can ensure job vacancies and profiles of those avail to work become known wider and faster. internet has also helped as vacancies and availabilities can be posted and matched in real time.
e.g. skills future SG

Question 13

cyclical (demand deficient) unN

Answer 13

is directly related to the business cycle. high unN willl necessarily accompany a recession bc of the lower level of econ. activity.

recession = lower level of econ activity = unemployment = lower confidence = lower C I = lower AD = lower demand of labour = unN.

Question 14

why are wages described as “sticky downwards”?

Answer 14

wages dont decrease easily even during periods of econ recession due to
1. contracts
2. unions

Question 15

structural unN (def + causes + exp + solutions)

Answer 15

is the unemployment the remains way past economic recovery.

causes: mismatch and rigidities

mismatch: situation where job vacancies exist but the skills of the unemployed are not the skills that employers demand.

1. due to new tech
2. due to decrease in demand
3. due to geographical shifts

labour market rigidities: refers to labour market related laws and regulations that do not permit the labour market to adjust to changing labour demand and labour supply conditions.

1. minimum wage laws.
2. national insurance contributions employers pay for their workers. higher labour cost = fewer workers hired
3. high money waged achieved by powerful labour unions
4. laws that guarantee job security aiming at protecting workers = harder to fire therefore more reluctant to hire
5. high unemployment benefits: decrease incentive of unemployed to accept a job offer.

how does govt solve:
1. training and retraining programmes or
2. they may subsidise or grant tax breaks to firms that hire and retrain long-term unemployed individuals.
3. low-cost loans to indivs enrolling in skill-creating courses/are willing to relocate to areas with better job prospects
4. to force unemployed to accept a job offer, decrease size, limit duration of unemployment benefits. (labour market supply-side policies 3.7)

Question 16

draw figure showing natural rate of unN

Answer 16

y - real wage
x - labour
check constantine pg 92

Question 17

explain natural rate of unemployment

Answer 17

unavoidable unemployment in any economy. which comprises of seasonal, frictional and structural unemployment.

Question 18

costs of unemployment

Answer 18

imposes many costs in the economy, the individual and on society, especially if its high and prolonged.

it impedes one of the most significant goals of macroeconomic policy - achieving and maintaining high levels of employment in the economy.

Question 19

economic costs of unemployment

Answer 19

1. “lost output forever” goods and services that could have been produced are not produced. resources are limited and unN represents a waste. higher unN is associated with a loss in real GDP as the econ is operating inside its PPC
2. rising unN decreases tax rev for govt as lose income = no income tax. they may collect unN benefits lower than income therefore CONSUMER EXPENDITURE DECREASES. and INDIRECT AND DIRECT TAX COLLECTED DECREASES
3. rise in govt expenditure: unemployment benefits, funding for retraining programmes, additional expenditures to remedy social costs that often arise as a result of unemployment(e.g. social unrest and crime)
4. increased income inequality when unN is prolonged and high. unN lost income while others maintain theirs = people slip into poverty, esp less educated as even if they manage to find a job later, it is often low pay, part time and insecure. rising income inequality is responsible for many economic, social and political problems.
5. force youngr and better educated work force to try to find a job abroad. emigration shrinks the economy’s human capital. country is deprived of its best and brightest members of labour force. = lower productivity, compromised future growth prospects, growth lowered and impeded in many future years to come.

Question 20

personal costs of unN

Answer 20

1. loss of income. goods and services less accessible to them, lose house of cant keep up w monthly mortgage payments, end up homeless
2. losing health insurance as in come countries, there is no national healthcare service that covers all individuals independently of their employment status.
3. long term unN lose skills. decreases job prospects when competing against others w up-to-date skills.
   4employers prefer to hire someone who is currently working somewhere else this is as they cant be sure why the unN person lost their job/isnt working anym
   5.**longterm unN suffer from family breakdown, accumulation of debt, alcohol or drugs abuse, loss of self-esteem or depression. some may even commit suicide. studies have shown that a 1% increasee in unN rate is associated w a rise in suicides between 0.8-1.3% among people under the age of 65.

Question 21

social costs of unN

Answer 21

1. higher incidence of crime and violence and other negative externalities resulting from increased drug and alcohol abuse. unN if high and prolonged, imposes costs on businesses, law enforcement and the judicial syste,, and healthcare.
2. regionally concentrated unN results in suffering in populations of whole towns: if major employer in an area is forced out of business, populations of whole towns may suffer. even of econ conditions are terrible, research shoes that people find it v difficult to move somewhere else with better jobs and financial prospects. society suffers in the long-term from the breakdown that follows. e.g. opioid crisis in many towns in USA.
3. high youth unN results in a lost generation of productive workers. problem is more pronounced and difficult. without assistance from state to improve high youth unN, their condition may also become a burden over the long term as they will never be able to land jobs w a secure and promising future. w insecure, part-time, low-paying jobs, they may never save enough for retirement - in turn creating further social problems in the future.
   5.society pay suffer from political costs. long tern unN concentrated in areas and age groups may create hightened levels of discontent that may erode the social fabric snd even risk democratic institutions.