4. Economic Performance - Unemployment, Types & Measures

Question 1

What is unemployment?

Answer 1

Those registered as able, available and willing to work but who cannot find work despite an active search.

Question 2

What are the two main types of measures for unemployment?

Answer 2

The Labour force survey The claimant count

Question 3

What is the labour force survey?

Answer 3

A survey given to households who then have to tick a box if they meet the criteria for being unemployed.

Question 4

What is the claimant count?

Answer 4

A measure of the number of people claiming unemployment benefits.- job seekers allowance

Question 5

What are the evaluation points for the labour force survey measure?

Answer 5

It’s a worldwide measure used by many countries - comparisons As it is a survey there is a chance there may be a sampling error in the collection of the data or people may lie

Question 6

What are the evaluation points for the claimant count measure of unemployment?

Answer 6

Is significantly cheaper as a way of measuring unemployment than the labour force surveyIt doesn’t necessarily include all people who would fit the definition of unemployment as there are several other criteria needed to gain unemployment benefits - some people will be unemployed but not part of the claimant count

Question 7

What are the possible evaluation points for both measures of unemployment?

Answer 7

Neither include the economically inactive – those you have been discouraged from looking for work. Neither include those you are underemployed – people working part time do you think they should be working full time don’t fall into the category of unemployed.Neither measure gives us information about the specific people who are unemployed and if there are any trends here.

Question 8

What are the six different types of unemployment?

Answer 8

CyclicalFrictionalStructuralSeasonalClassicalVoluntary

Question 9

What is cyclical (Demand deficient) unemployment?

Answer 9

Unemployment caused by a lack of demand in the economy – employment is derived from demand for goods and services.

Question 10

What is structural unemployment?

Answer 10

Unemployment caused by structural issues in the economy – normally either occupational or geographical immobility.

Question 11

What is occupational immobility?

Answer 11

This is when people don’t have the necessary skills to switch jobs, all the skills that they do have are not valued so they become unemployed.

Question 12

What is geographical immobility?

Answer 12

This is when someone either can’t or doesn’t want to move to an area of the country meaning they become unemployed.

Question 13

What is frictional unemployment?

Answer 13

This is unemployment made up of people who have left a job and are in the process of finding a new one.

Question 14

What are three other minor types of unemployment?

Answer 14

Seasonal unemploymentClassical unemploymentVoluntary unemployment

Question 15

What is full employment?

Answer 15

A situation where the number of people wishing to work on the going market real rate equals the number of workers employers wish to higher.

Question 16

What is classical (real-wage) unemployment?

Answer 16

It is unemployment occurs when worker wages stay above the equilibrium point meaning that there is a surplus of labour which then creates unemployment. This can be as a result of ‘sticky downwards’ wages.

Question 17

What is the real wage theory of unemployment?

Answer 17

This is an exclamation of how classical unemployment occurs. This says; wages stay high, workers willing to supply labour for that wage>no. of workers needed - excess labour created. Bigger difference = higher unemployment.

Question 18

What is the natural rate of unemployment?

Answer 18

This is the equilibrium unemployment expressed as a rate rather than a level.

Question 19

What is full employment?

Answer 19

A situation where the number of people wishing to work on the going market real rate equals the number of workers employers wish to higher.

Question 20

What are the two overarching categories of unemployment?

Answer 20

Voluntary and Involuntary Unemployment - all of the above types of unemployment are voluntary apart from cyclical (demand-deficient). For this reason, cyclical unemployment is the only type excluded from NRU.