Employment Flashcards
Unemployment definition:
“The number of people of working age (16 - retirement) who are able and available (not ill or in FT education) for the current wage rate but who do not have a job”
What is the claimant count?
= No. of people claiming unemployment benefits from gov’t
- The employed + the claimant count = total labour force
- Easy to get data on but gov’t has specific rules which decide who can claim benefit, those excluded include: over 55’s, those who chose to leave workforce but now want to rejoin, those looking for PT work etc.
What are Labour Force surveys?
= The use of surveys based on an accepted definition of unemployment
- Carried out by the gov’t quarterly throughout Europe
LF participation rate =
(Labour force/Adult population) x 100
Define the natural rate of unemployment
= The normal rate of unemployment around which the unemployment rate fluctuates
- Deviation from this is cyclical unemployment (due to a downturn in the business cycle)
Define frictional unemployment
= Unemployment resulting from the time it takes workers to search for suitable jobs
- The result of changes in the demand for labour from different firms or industries/regions (sectoral shifts)
- Workers may also be looking for a job which is a better fit for them.
Define structural unemployment
= Insufficient amount of jobs available
- Wages are set above the level which brings S+D into equilibrium this is due to min wage laws, unions and efficiency wages.
What is national insurance?
= Benefits paid to the unemployed whose previous employer no longer needed their skills
- Unintentionally increases frictional employment as workers have less incentive to find a new job and are less likely to negotiate for job security
The economics of unions?
= A type of cartel (sellers working together to increase their market influence)
- Collective bargaining is the process by which unions and firms agree on the terms of employment
- Unions ask for higher wages, better benefits and working conditions than the firm would offer in its absence then use techniques such as work to rule nd a strike to ensure they comply
What are the effects of unions?
- When a union causes wages to increase above equilibrium level the supply of labour increases but the demand decreases
- Workers who remain employed are better off (insiders)
- But those now unemployed (outsiders) can either wait for another chance to earn a high union wage or just take jobs in firms which aren’t unionized
Are unions good or bad for the economy?
Bad
- Reduce Q of labour demanded and reduce wages in the rest of the economy
- High union wages increase unemployment to less than the efficient competitive level
- Some workers benefit at the expense of others
Good
- Reduce market power of firms who could have otherwise offered low wages/poor working conditions
- Represent workers views to promote a happy and productive workforce
Elements of the theory of efficiency wages
- Improved worker health
- Decreased turnover
- Workers put in more effort as they are more eager to keep their jobs (Marx “reserve army of unemployed”)
- Higher wages attract a better pool of workers to apply
The cost of unemployment to the individual
- Loss of earnings
- Stress, self-esteem and health problems
- Drug and alcohol abuse due to social exclusion (10%)
- Family breakdown
- De-skilling
The cost of unemployment to society
- Opportunity cost (not maximising PPF, inefficient use of resources)
- Less people paying taxes, more people needing benefits = budget deficit = stagnant economy due to increased savings
- Firms with high elasticity of demand may be forced to let go of workers
- If there are concentrated pockets of unemployment it can be difficult to recover from the cycle of economic decline
