Chapter 30: Employment and unemployment

Question 1

Changes in the patterns of employment

Answer 1

• 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

Question 2

Changes in the levels of employment

Answer 2

• Employment and unemployment can increase if labour force grows faster than the number of jobs available
• Possible for unemployment to fall without an increase in employment as some unemployed people may become economically inactive

Question 3

Frictional unemployment

Answer 3

• Workers who have been fired or left one job may have to wait before finding another job
• Temporary unemployment arising from workers being in between jobs
• Search unemployment arises when workers do not accept the first job offered
• Casual unemployment occurs when people are out of work between periods of employment
• Seasonal unemployment affects workers including those working in the building and tourist industries whose labour is not in demand at certain periods of theyear and during periods of bad weather

Question 4

Structural unemployment

Answer 4

• Unemployment cause by long term changes in the pattern of demand and methods of production
• Industries and occupations can become smaller or cease to exist as a result of anothe rcoutnry becoming better at producing the produt, a substitute being found, or capital being substituted for labour
• More serious that frictional uneployment as iot p[ersits for longer periods and usually affects more workers
• If workers are immobile, unemployment will be greater and persist for a longer time
• Measures to reduce structural unemployment alsoi include those which aim to increase labour mobility and encourage firms to move to areas of high unemployment

Question 5

Cyclical unemployment

Answer 5

• More serious as it may affect more workers and is spread throughout the country
• Arises from a lack of aggregate demand
• IN a recession, demand for labour is likley to fall
• Government seeks to raise aggregate demand by reducing income tax or increasing its expenditure

Question 6

Effects of unemployment on unemployed

Answer 6

• SUffer a fall in income
• Do not receive any financial assitance in some countries
• Unemployment benefits are lower than what they were earning
• Sense of worth lost
• Decline in mental and physical health
• Lead to marriage break up
• Adverse effect on the education of the children of the unemployed and hecne their employment chances
• Reduces chances of gaining another job
• Lose work habit and confidence may dip

Question 7

Effect of unemployment on firms

Answer 7

• Can unemploy unemployed workers
• Downward pressure on wagfe rises as workers can be easily replaced
• Workers may be prepared to be more flexible in terms of the tasks and hours they work
• High rate of unemployment is likley to mean low demand
• Firms will be reducing production

Question 8

Effect of unemployment on the economy

Answer 8

• Imposes an opportunity cost on an economy
• Economy is not using all of its resources
• Government tax revenue low
• Unemployment puts pressure on government expenditure
• HIgher government expenditure involves an opportunity cost

Question 9

Policies to reduce unemployment

Answer 9

• If frictionalm it may seek to improve the working of the labour market by using supply side policy measures
• Structural, a government would also use supply side policy measures
• To reduce cyclical, a government will use expansionary monetary and fiscal policy

Effectiveness:
- Whether the government indentified the cause of unemployment correctly
- Identify accurately which industries will expand in the future and what skills will be needed
- Reducing cyclical unemployment requires a government to judge accurately the gap between the current real GDP and the full employment level
- Too much spending can cause inflation