employment

Question 1

unemployed

Answer 1

those who are willing and able to work, but are not employed.
they are actively seeking work and usually looking to start within the next 2 weeks.

Question 2

employed

Answer 2

those with a job

Question 3

governments aim for empoyment

Answer 3

• to have as near to full employment
• they account for frictional unemployment by aiming for an unemployment rate of around 3%
• when this employment rate is met, the economy is said to have full employment

Question 4

measures of unemployment

Answer 4

-it is usually difficult to accurately measure unemployment.
some of those in employment might claim unemployment benefits, whilst some of the unemployed might not reveal this in a survey

Question 5

main measures of unemployment in the uk

Answer 5

• the claimant count

- the international labour organisation (ILO) & the uk labour force survey (LFS)

Question 6

the claimant count

Answer 6

counts the number of people claiming unemployment related benefits, such as job seeker’s allowance. they have to prove they are looking for work.

Question 7

evaluating the claimant count

Answer 7

• not every unemployed person is eligible for, or bothers claiming JSA.
• those with partners on high incomes are not eligible
• the method generally underestimated the level of unemployment

Question 8

participation rate

Answer 8

economically active/working age population x 100

Question 9

unemployment rate

Answer 9

unemployed/economically active x 100

economically active = [unemployment + employment]

Question 10

employment rate

Answer 10

employed/ working age population x 100

Question 11

the international labour organisation & the uk labour force survey

Answer 11

the LFS is taken on by the ILO. it directly asks people if they meet the following criteria:

• been out of work for 4 weeks
• willing and able to start work within 2 weeks
• workers should be available for 1 hour/week. part time unemployment is included.

-since the part time unemployed are less likely to claim unemployment benefit, this method gives a higher unemployment figure than the claimant count

Question 12

2 factors that cause unemployment

Answer 12

demand side
>lack of AD- labour a derived demand

supply side
>inflexible/inefficient labour markets

Question 13

the causes of unemployment

Answer 13

• structural
• frictional
• seasonal
• cyclical
• voluntary
• real wage

Question 14

structural unemployment 
(supply side)

Answer 14

• occurs with a long decline in demand for the goods/services in an industry, which costs jobs .
• e.g. industries such as car manufacturing, where labour is replaced by capital.
• decline of the coal & ship industries, led to a great deal of structural unemployment.

-this type of unemployment is worsened by the geographical & occupational immobility of labour.
if workers do not have the transferable skills to move to another industry, or if it is not easy to move somewhere jobs are available, then those facing structural unemployment are likely to remain unemployed in the long run.

-globalisation also contributes to structural unemployment, since production in the manufacturing sectors, moves abroad to countries with lower labour costs. this means that workers trained for these jobs will become unemployed, because the industry has declined in size/has been removed from the economy

Question 15

occupational immobility

Answer 15

• nature of economic activity change over time
• change in structure of economy
• decline in traditional heavy industry
• replacing people with machines
• workers lack transferable skills to fill jobs available
• coal miners- doctors/lawyers

Question 16

geographical immobility

Answer 16

• unemployed in one region
• jobs available in another
• distance, absence of infrastructure (transport links)- unrealistic to commute
• family ties
• cost of living

Question 17

long term unemployment (hysteresis)

Answer 17

• been out of work for a year or more
• if people do not have the skills they are more likely to be long term unemployed
• the longer someone is out of work the less attractive they become to employers
• this makes it more likely that they will remain unemployed
• they become discouraged and start to give up- making it less likely they will find work
• this could lead to permanent damage to the productive potential of the economy
• undermining long term growth rates and living standars

Question 18

frictional unemployment

Answer 18

• this is the time between leaving a job and looking for another job. it is common for there to always be some frictional unemployment, and it is not particularly damaging since it is only temporary.
• e.g. it could be the time between graduating from university and finding a job
• this is why it is rare to get 100% employment: there will always be people moving between jobs.

Question 19

voluntary unemployment

Answer 19

this occurs when people prefer to remain on benefits rather than take a job. eg. unemployed refuse a job offer. some debate exists over the extent of voluntary unemployment

Question 20

seasonal unemployment

Answer 20

this occurs during certain points in the year, usually around summer and winter.
during summer, more people will be employed in the tourist industry, when demand increases

Question 21

demand deficiency (cyclical unemployment)

Answer 21

• caused by a lack of demand for goods/services, usually occurs during periods of economic decline or recessions.
• firms are either forced to close or make workers redundant, because there profits are falling due to decreased consumer spending, and they need to reduce their costs
• this causes output to fall in several industries

-this type of unemployment can actually be caused by an increases in productivity, which means each worker can produce a higher output, and therefore fewer workers are needed to produce the same quantity of goods and services

Question 22

real wage unemployment

Answer 22

wages above the market equilibrium may cause unemployment. classical economist argue that by letting wages fall to the equilibrium level, there would be no unemployment

Question 23

the consequences of unemployment

consumers

Answer 23

• if consumers are unemployed, they have less disposable income and their standard of living may fall as a result.
• there are also psychological consequences of losing a job, which could affect the mental health of workers

Question 24

the consequences of unemployment

firms

Answer 24

• with a higher rate of unemployment, firms have a larger supply of labour to employ from. this causes wages to fall, which would help firms reduce their costs.
• however, with high rates of unemployment, since consumers have less disposable income, consumer spending falls so firms may lose profits.
• producers which sell inferior goods might see a rise in sales. - it might cost firms to retrain workers, especially if they have been out of work for a long time

Question 25

the consequences of unemployment

workers

Answer 25

with unemployment, there is a waste of workers’ resources. they could also lose their existing skills if they are not fully utilised

Question 26

the consequences of unemployment

the government

Answer 26

• if the unemployment rate increases, the government may have to spend more on JSA, which incurs an opportunity cost because the money could have been invested elsewhere.
• they would also receive less revenue from income tax, and from indirect taxes on expenditure, since the unemployed have less disposable income to spend

Question 27

the consequences of unemployment

society

Answer 27

• there is an opportunity cost to society, since workers could have produced goods and services if they were employed
• there could be negative externalities in the form of crime and vandalism, if the unemployment rate increases

Question 28

effects of full employment

Answer 28

• state when all factors of production are used to their productive potential- maximising the output of the economy
• put up upward pressure on the price level, since consumer demand in the economy is high- will lead to demand pull inflation
• there could also be wage inflation, which could push up the price of production for firms- since labour is in a shortage
• social benefits- crime rates might fall and standards of living might increase if people have more disposable income. inequalities and poverty might fall
• consumers & firms might have more confidence in an economy where resources are used to their full potential- could encourage long term sustainable growth
• government budgets might improve since tax revenues increase and spending on welfare benefits falls