employment Flashcards
unemployed
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.
employed
those with a job
governments aim for empoyment
- 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
measures of unemployment
-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
main measures of unemployment in the uk
- the claimant count
- the international labour organisation (ILO) & the uk labour force survey (LFS)
the claimant count
counts the number of people claiming unemployment related benefits, such as job seeker’s allowance. they have to prove they are looking for work.
evaluating the claimant count
- 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
participation rate
economically active/working age population x 100
unemployment rate
unemployed/economically active x 100
economically active = [unemployment + employment]
employment rate
employed/ working age population x 100
the international labour organisation & the uk labour force survey
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
2 factors that cause unemployment
demand side
>lack of AD- labour a derived demand
supply side
>inflexible/inefficient labour markets
the causes of unemployment
- structural
- frictional
- seasonal
- cyclical
- voluntary
- real wage
structural unemployment (supply side)
- 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
occupational immobility
- 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
geographical immobility
- unemployed in one region
- jobs available in another
- distance, absence of infrastructure (transport links)- unrealistic to commute
- family ties
- cost of living
long term unemployment (hysteresis)
- 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
frictional unemployment
- 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.
voluntary unemployment
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
seasonal unemployment
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
demand deficiency (cyclical unemployment)
- 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
real wage unemployment
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
the consequences of unemployment
consumers
- 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
the consequences of unemployment
firms
- 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
the consequences of unemployment
workers
with unemployment, there is a waste of workers’ resources. they could also lose their existing skills if they are not fully utilised
the consequences of unemployment
the government
- 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
the consequences of unemployment
society
- 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
effects of full employment
- 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
