Chapter 24 Flashcards
What does the term employment mean
Either working for a firm/organisation or self-employed
What does the term unemployed mean
Those able and willing to work, but are not employed. They are actively seeking work and looking to start within the next two weeks.
What does the term economically inactive mean
Those who are of working age, but not looking for work. Students, retired people, sick people or looking after family members
What are the 2 types of measurement for unemployment
The claimant count and the ILO, and the UK labour force survey.
How does the claimant count measure unemployment
This counts the number of people claiming unemployment-related benefits such as JSA. They have to prove they are actively seeking work.
What are the issues with the claimant count
○ Evaluating this claimant count, not every unemployed person is eligible, or bothers claiming JSA. Those with partners on high incomes will not be eligible for the benefit, even if they are unemployed.
○ Though there may be people employed that are claiming the benefit. The measurement often underestimates the number of employed.
What are the 5 main causes of unemployment
Structural, Frictional, Seasonal, and Demand deficiency and real wage inflexibility
What is structural unemployment
Often occurs due to a long-term decline n demand for goods and services in a certain industry, which costs jobs.
This can be worsened by the geographical and occupational immobility of labour. If the workers do not have transferable skills, it can be long term
What is frictional unemployment
The time between leaving a job and looking for another job. There will mostly always be some level of unemployment in an economy.
What is seasonal unemployment
This occurs during certain points of the year, usually around summer or winter. In the summer tourism provides jobs as demand increases
What is demand deficiency (cyclical unemployment)
This is caused by a lack of demand for goods and services and usually occurs during periods of economic decline or recession. Firms are forced to make employees redundant as their profits falls due to a lack of demand and they need to cut their costs.
This can be caused by workers becoming more productive and means each worker has higher output so they don’t need as many employees
What is real wage inflexability
Wages above the market equlibrium may cause unemployment
Consequences of unemployment on firms
Higher rates of unemployment mean larger supply of labour so wages can decrease and help firms reduce costs.
Consumers have lower disposable incomes on average so profits fall, but this may act differently on inferior goods
Cost firms to retrain workers
Consequences of unemployment on consumers
They have less disposable incomes so their standard of living may fall
The mental health of workers may be damaged
Consequences of unemployment on the Government
They will have to spend more on welfare benefits (JSA)
Less tax revenue
Opportunity costs of expenditure on schools/ healthcare
