Chap 30 Flashcards
Employment
being involved in a productive activity for which a payment is received
Unemployment
being without a job while willing and able to work
Changes in the patterns of employment
- Industrial structure
- Proportion of women in employment
- Proportion of workers in the private and public sectors
- Full-time and part-time work
- Employed and self-employed
- Informal and formal economies
- High and low-quality employment
- Flexible employment
Informal and formal economies difference
Informal..
- Do not have the same access to the social security benefits, employment protection and rights as workers in the formal economy.
- Does not include unions and so the workers cannot bargain collectively to improve their conditions.
- Lower productivity, lower levels of training and lower wages than workers in the formal economy.
Flexible labour force
a labour force is one which adjusts quickly and smoothly to changes in market conditions
Forms of flexibility in labour force
- Number of workers employed (numerical flexibility)
- Temporal flexibility (the ability to change the number of hours people work)
- Locational flexibility (the ability to change the location where workers work)
- Functional flexibility (the ability to change the tasks workers perform)
- Wage flexibility (the ability to raise or lower wages).
Does a rise in employment reduce unemployment?
Yes, if it is the unemployed who fill at least some of the extra jobs
No, if the labour force grows faster than the number of jobs available. It is also possible for unemployment to fall without an increase in employment.
Some unemployed people may reach retirement age, some may go into full-time education, some may emigrate, while some may just stop searching for work.
Economically active
those in the labour force, both the employed and the unemployed
Economically inactive
those not in the labour force (retired early, those in higher education, homemakers and the long-term sick)
Labour market participation rate
the proportion of the working-age population who are in the labour force.
Factors that influence the labour market participation rate
- The wages on offer
- Social attitudes to working women
- Provision for the care of children and the elderly
- Social attitudes and provision for the disabled to work
- The proportion of school leavers who go into higher education
Define Claimant count
a measure of unemployment which counts as unemployed those in receipt of unemployment benefits.
Major ways of measuring unemployment are to:
- count those in receipt of unemployment-related benefits and
- carry out labour force surveys
Unemployment costs influenced by
the extent of the unemployment
the duration of the unemployment
the cause of the unemployment.
Claimant count A&D
A:
1. relatively cheap and quick, as the information is gathered anyway by the government to know the amount paid out in benefit and its recipients.
D:
1. tends to understate unemployment
2. people who are actually working fraudulently claim benefits
Labour Force Survey (ILO) Measure
a measure of unemployment which counts as unemployed people who identify as such in a survey
ILO A&D
A:
1. more accurate
2. helps make international comparisons
D:
1. takes longer
2. counts people as employed if they do any work, even just an hour’s work. (relatively low unemployment rate but a relatively high underemployment rate)
Kinds of unemployment
Frictional unemployment
Structural unemployment
Cyclical unemployment
Frictional unemployment
temporary unemployment arising from workers being in between jobs
Structural unemployment
unemployment caused by long- term changes in the pattern of demand and methods of production
Cyclical unemployment
unemployment caused by a lack of aggregate demand
Forms of frictional unemployment
Search unemployment: When workers do not accept the first job offered, but spend time looking around for what they regard as an ‘acceptable job’.
Casual: out of work between periods of employment (actors and migrant farm workers)
Seasonal: affects workers, including those working in the building and tourist industries, whose labour is not in demand at certain periods of the year and during periods of bad weather.
Why would industries and occupations become smaller or cease to exist? (Structural unemployment)
- another country (or countries) becoming better at producing the product
- substitute being found
- capital being substituted for labour
Forms of structural unemployment
Regional unemployment
Technological unemployment
Regional unemployment
unemployment caused by a decline in job opportunities in a particular area of the country
Technological unemployment
unemployment caused by workers being replaced by capital equipment.
Why is structural unemployment more serious than frictional unemployment
Persists for longer periods and usually affects more workers
Measures to reduce frictional unemployment
- Increase labour mobility (including education
and training) - Increase the incentive to work (increase the gap between pay and unemployment benefit by cutting income tax rates and reducing unemployment benefits)
- Increase information on job vacancies so that people are made more aware of the jobs on offer.
Measures to reduce structural unemployment
- Increase labour mobility
- Encourage firms to move to areas of high unemployment (subsidies to speed up expansion)
Why is cyclical unemployment more serious than structural unemployment
affects more workers and it is spread throughout the country.
Measures to reduce cyclical unemployment
The government will seek to raise aggregate demand by reducing income tax or increasing its expenditure (expansionary fiscal and monetary policy)
stock
number of people unemployed at any one time
the number of people unemployed may be higher than in a previous period in these circumstances:
- more workers have been dismissed from their jobs
- more people have entered the labour force without finding a job
- people have been unemployed for a longer period of time.
Benefits of unemployment
- Easier for firms, wishing to expand, to recruit new workers
- Keep down inflationary pressure by lowering wage rises- greater flexibility of workers (out of fear of replacement by unemployed) would enable firms to adjust more quickly to changes in market conditions
Effects on the unemployed
- Fall in income (some countries do not provide any financial assistance)
- Loss of self-worth
- Decline in the mental and physical health of the unemployed (stress & low income)
- Marriage break-ups
- Effects the education of the children and hence their employment chances]
- Reduce a person’s chances of gaining another job (lose out on training in new methods and technology
- Lose the work habit
- Confidence may dip
Effects on firms
- Greater flexibility of workers out of fear
- High unemployment rate means low demand for most firms’ products
Effects on the economy
- Unemployed workers mean that the economy is not using all of its resources
- Government tax revenue will be lower
- Puts pressure on government expenditure. (unemployment benefits)
- Rising levels of crime
- Opportunity cost for all spending
Why would governments’ tax revenue decline due to unemployment.
Expenditure falls; indirect tax
Income falls; income tax
Firms’ profits fall; corporation tax
