4. Unemployment Flashcards
What are the effects of unemployment?
- Negative multiplier
- Loss of income tax
- Increased welfare expenditure = opportunity cost
- Lack of consumer choice
- Consequences to firms
What is economically inactive?
Proportion of the working age population that is not in or seeking employment (in the last 4 weeks)
What is the impact of migration on unemployment?
- Provides skilled labour where there is short supply, filling gaps
- May lead to downward pressure on wages
What are the 2 causes of structural unemployment?
- Geographical immobility: workers cannot move to areas with vacancies due to housing/transport difficulties
- Occupational immobility: mismatch between existing skills of population and news ones required
What is unemployment?
Those without a job who are actively seeking work at current wages
What is frictional unemployment?
When workers are in the process of moving from one job to another
What is underemployment?
When an individuals job does not fully utilize their skills/abilities or provide sufficient hours to meet their needs
What is structural unemployment?
When changing structure of the economy or technological advancements creates mismatch in existing skills and skills required
Formula for unemployment rate
Unemployed people/Labour force x 100
Why does claimant count tend to be lower?
- Many people not eligible for job seekers allowance
- Some workers may be financially supported through spouses or pensions
What are the 2 ways unemployment is measured?
- Clamaint count: measures the number of people claiming job seekers allowance each month
- Labour force survey: involves interviews and telephone conversations with UK households
What is cyclical unemployment?
Occurs as a result of lack of AD in the economy (typically during a recession)
What is seasonal unemployment?
When people are unemployed at particular times of the year when demand for labour is lower than usual
What is real wage unemployment?
A sustained increase in real wages above free market equilibrium wage, resulting in an excess supply of labour
