Employment Flashcards
What is the participation rate
the percentage of the population in work or actively looking for work
what is employment
the number of people who are in a job and working inc self employment
what is unemployment
a person who is of working age
without a job
available to start within 2 weeks
and has been looking for the past 4 weeks
what is the claimant count
the number of people without a job and claiming job seekers allowance
what is inactivity
people of working age without a job but not looking for work
what is real wage unemployment
a situation where unemployment exists as wages are too high relative to the equilibrium wage rate that would clear the labour market
what do classical economists believe about unemployment
that if real wages were allowed to adjust downwards, unemployment would disappear as workers would be willing to work for less.
what is cyclical unemployment
workers are unemployed due to low levels of AD in the economy
what is seasonal unemployment
workers are temporarily unemployed due to low levels of demand at particular times of the year
what is frictional unemployment
workers are temporarily unemployed because even though jobs exist they haven’t found it yet
what is structural unemployment
the unemployed do not have the right skills for the jobs available
what policy will be a solution to structural unemployment
SUPPLY - provide retraining and education/skills programs
what policy will be a solution to cyclical unemployment
increase AD
what policy will be a solution to frictional unemployment
provide job centres and online job info
what policy will be a solution to seasonal unemployment
encourage a balance of jobs in the area
provide subsidies for hi-tech start ups or help create industrial parks in seaside towns
what is cyclical unemployment (long answer)
-due to lack of demand
- in a recession, firms ‘downsize’ making people redundant
- in a recession, there is an increase in spare capacity
- Keynesian economies would use demand side policies to shift AD back out
demand side policies to cut unemployment
- fiscal policy: G^ or T(d) -> stimulates growth + AD ^
- monetary policy: interest rates (d) -> encourages consumption and
investment -> AD^ - depreciating currency: interest rates (d) -> currency depreciates ->
exports^ imports (d) (expenditure switching) - reduce national insurance -> firms more likely to employ more ppl
- gov funds apprenticeships
- reduce corporation tax: investment^
- tax incentives for research
- enterprise policies to encourage new business start ups
supply side policies to cut unemployment
- tax cuts: tax (d) on businesses and incomes can increase investment and profits, and incentive for work. hiring^ productivity^
- deregulation: removing unnecessary regulations can reduce costs for businesses and encourage innovation and investment -> more jobs
- labour market reforms: 0 hour contracts. Makes it easier to hire and fire workers and can improve flexibility and reduce structural unemployment
- education and training: investing in education and training can improve the skills of the workforce improving mobility
what is the natural rate of unemployment
the rate of unemployment when the labour market is in equilibrium at YFe.
It is the difference between those who would like a job at a the current wage rate and those who are willing and able to take a job.
what is under-employment
people who are employed in roles they are over-qualified for or those working part time who wish to be working full time
what is the UK’s unemployment goal
3-4%
what is the phillips curve
an inverse relationship between unemployment and inflation
what does the phillips curve look like
the reflection of the keynesian LRAS curve
what does the phillips curve state
long step by step answer
- when unemployment is high, inflationary pressures in an economy tend to be weak
- a significant fall in unemployment may not cause much of a rise in inflation - spare capacity is being used up and rising employment often means efficient use of the factors of production
- as unemployment falls further, especially cyclical unemployment, then wage pressures and price pressures begin to accelerate
- as unemployment falls to low levels the risk of a significant increases in inflation goes up. At this stage the output gap is likely to be positive and the factors of production are experiencing shortages
- the can lead to wage inflation which leads to a faster rise in consumer prices hence the inverse relationship between unemployment and inflation
- the trade-off between jobs and prices has become unfavourable. when inflation is accelerating typically the central bank will start a tightening monetary policy by raising interest rates
what is NAIRU
Non-Accelerating Inflation Rate of Unemployment
it is the level of unemployment below which the rate of inflation might be expected to accelerate significantly
