Employment

Question 1

What is employment?

Answer 1

• Employment: economic use of labor as a factor of production.
(This also includes those who are self-employed)

Question 2

What is unemployment?

Answer 2

• Unemployment: Those who are willing and able to work but unable to find a job.

1. People of working age
2. Without work
3. Available for work
4. Actively seeking employment

Question 3

What is full employment?

Answer 3

• Full Employment: Everyone in the country who is willing and able to work finds a job.

Question 4

What are the employment patterns that relate to developing countries?

Answer 4

Employment sector

Delayed entry to the workforce

Formal sector employment

Female participation rate

Public sector employment

Flexible working patterns

(ffed p , fed up acronym)

Question 5

Measuring unemployment: Two Methods

Answer 5

• Two methods:

1. The claimant count measures those who are out of work and claim unemployment benefits.
2. The labor force survey uses a household survey to collect data on employment status.’

Question 6

Unemployment rate formula?

Answer 6

number of unemployed/workforce

X 100

Question 7

Issues with measuring unemployment

Answer 7

• The claimant count may underestimate unemployment as it does not count people who are not able or unwilling to claim unemployment benefits.
• It also does not identify hidden unemployment that may exist in the economy.
• The labor force survey may be difficult to administer in less developed countries and depends on people’s willingness to complete the survey and to complete it honestly.

Question 8

What is underemployment?

Answer 8

Workers are overqualified for the jobs they are working.

Involuntary part-time work:
Where workers who could and would like to be working for a full workweek can only find part-time work.

Question 9

Why do governments want to know the unemployment rate?

Answer 9

To know how many people are unemployed correlates to how good the economy is doing.

Question 10

Types of unemployment?

Answer 10

• Frictional Unemployment
• Structural Unemployment
• Cyclical Unemployment

Question 11

What is Frictional unemployment?

Answer 11

• This is when people are between jobs or they have left education and are waiting for their first job. It is not normally seen as a serious problem.

Question 12

Solutions for Frictional unemployment?

Answer 12

• Unemployment benefits should not be at a level that removes the incentive to work. If unemployment benefits were reduced unemployed workers might become more willing to work.
• Improve awareness of available jobs

Question 13

What is structural unemployment?

Answer 13

• Structural unemployment occurs when there is a
permanent fall in demand for a particular type of labor
e.g. coal mining
This is a very harmful type of unemployment as it tends to result in long-term unemployment.
• People who lose their jobs in one area lack the necessary skills to take on the newly created jobs – occupational immobility.
• If there are other jobs in other parts of the country but people are not willing or able to move this is geographical immobility

Question 14

Different causes of Structural unemployment?

Answer 14

• New technologies replace humans
• Demand for a particular type of labor - lower cost labor in other countries
• Changes in consumer tastes – e.g. environmentally friendly types of energy

Question 15

Solutions for Structural unemployment?

Answer 15

The key is to increase occupational mobility (allow workers to move from job to job)
• An education system that trains people to be more occupationally flexible
• Adult retraining programs
• Government gives subsidies to firms that provide training for workers
• Enhance geographic mobility by building affordable housing or giving subsidies/tax breaks
• Set up apprenticeship programs to allow people to gain skills

Question 16

Disadvantages for solutions to improve Structural unemployment

Answer 16

• Involve a high opportunity cost

* These policies are only effective in the long term

Question 17

What is cyclical unemployment?

Answer 17

• Unemployment that occurs due to a fall in aggregate demand.
• Because fewer goods and services are being demanded, firms don’t need as many workers.

Question 18

Solutions for cyclical unemployment?

Answer 18

Any policy that increases AD should solve the problem
• Monetary policy – reduce interest rates or increase the money supply
• Fiscal policy – Government spends more or reduces income tax or indirect taxation’

Or long term like Supply-side

Question 19

What are the costs of unemployment to the people themselves?

Answer 19

• Low income (benefits) means a lower standard of living for them and their families
• High levels of stress, anxiety, and depression
• High levels of divorce and suicide

Question 20

What are the costs of unemployment to society?

Answer 20

• High levels of unemployment in particular areas can be seen in the forms of poverty, homelessness, high rates of crime, and increased gang activities

Question 21

What are the costs of unemployment to the economy as a whole?

Answer 21

• Operating at a point within the production possibility curve
• Opportunity cost of government benefits
• Less income tax, less consumption, less indirect tax
• More government spending on fixing social problems