Employment Flashcards
chapter 22
why is it the goal of every government in the modern economy to achieve high levels of employment?
+ higher tax take in form from income taxes
+ less government expenditure on social welfare payments
+ increases standard of living for citizens
what is full employment?
when everybody seeking work is employed at existing wage rates
…happens when a sustained period of economic growth occurs
what are the positive consequences of full employment?
- INCREASED STANDARD OF LIVING
people have more disposable income to spend on goods/ services - INCREAED GOVERNMENT TAX REVENUE
income tax on what they earn and VAT on what they spend - REDUCED SOCIAL WELFARE BILL
lower gov. spending e.g. jobseekers benefit and allowance - INCREASED AGGREGATE DEMAND
including consumption, investment, government expenditure and net exports - INCREASED INVESTMENT
businesspeople expectations for the future are good, companies want to enlarge
what are the negative consequences of full employment ?
- POSSIBLE LABOUR SHORTAGE
there is no more staff available, this may stunt the growth- leads to a move abroad - INFLATIONARY PRESSURES
demand pull inflation as demand exceeds supply - PRESSURE ON STATE INFRASTRUCTURE
traffic on roads, transportation networks, child minding services - DETERIORATION / LOSS OF SERVICES
people would not be attracted to low payed jobs, must increase wages for low quality jobs,…
name 3 different types of unemployment
- STRUCTURAL
when people are no longer needed due to technical progress and competition
(e.g. online checkin on airports) - GEOGRAPHICAL
jobs in one area but unemployment in another area (e.g. jobs in cork, unemployment in Dublin) - SEASONAL
when staff is only employed in a certain part of the year… (e.g. agricultural sector, holiday and tourism sector)
what is meant by unemployment?
all those seeking work at existing wage rates but unable to find work
name the 2 methods of measuring unemployment!
life register
quarterly national household survey
what are the limitations of life register for an accurate measurement of unemployment?
it includes people who are:
- legally working part time and signing part time (seasonal industries)
- engaged in the black/shadow economy
- not seeking employment
why is the quarterly national household survey useful as an accurate measure of unemployment ?
it excludes people who:
- legally sign on and work simultaneously
- legally draw unemployment benefit/ unemployment assistance because they work 3 days per week or are in seasonal or casual labour
- sign on, but aren’t seeking employment or aren’t available for work
what causes unemployment in Ireland ?
- economic recession (cyclical)
- relocation of industry
- irish companies exporting to the US (trump) or the UK (Brexit)
- banking crisis
- uncertainty about futur
- reliance on construction sector/ structural unemployment
what is the impact of unemployment on the economy?
- decrease in consumer demand
- falling inflation or deflation
- entrepreneurs hesitant to invest
- more government expenditure on social welfare
- lower tax receipts
- greater tax burden on the employed/ reducing the incentive to work
- increased social problems
- wage increases not sought
- reduced demand for imports
how does a rise in unemployment levels affect government current finances?
- reduction in taxation revenues
- increase in social welfare payments
how does a rise in unemployment levels affect the balance of payments current amount?
- lower incomes leading to a reduction in imports
- rising unemployment may mean closure of business - some of which may be export oriented, hence lower exports
how does a rise in unemployment levels affect price inflation?
- moderation in demand pull inflation, as demand decreases
- long term : increase in unemployment may lead to the need to increase taxation or increase charges for certain services, resulting in a rise in the consumer price index
strategies for reducing unemployment in Ireland?
DECREASE TAXATION
bolster personal expenditure, higher demand, higher employment
SUSTAIN A LOW RATE OF CORPORATION TAX
ireland has one of the lowest in the EU and is under constant pressure
SUBSIDISE ADDITIONAL LABOUR
grants for employing people, introduced tax break down for additional employees
REDUCE COSTS FOR BUSINESSES
oversee fall in commercial rates and utility prices, lower cost of production
CAPITAL INVESTMENT BY GOVERNMENT improve infrastructure (e.g. new motorways,...) - creates jobs automatically - multiplier effect
ENCOURAGE NEW INVESTMENT
grants for investing in projects, leads to research and development
ENCOURAGE LABOUR-INTENSIVE INDUSTRIES
abolish the travel tax, tourism-friendly environment, lower VAT rate in restaurants, hotels,…
INVESTMENT IN EDUCATION AND TRAINING
CONSUMPTION OF IRISH GOODS
ENCOURAGE ENTREPRENEURSHIP
What is meant by ‘ job-sharing’ ?
if two people share one job.
e.g. one works in the mornings and one in the afternoon
one works 3 days a week and one 2
- this does not cost the employer any more
- but the employee gets less income
what are the effects of job-sharing?
- FEWER PEOPLE ON SOCIAL WELFARE
good for government - LESS ABSENTEEISM
good for employer - LOWER TAX REVENUE INTAKE DUE TO LOWER MARGINAL TAX RATES
bad for government, good for employee - FEWER IMPORTS AS A RESULT OF REDUCED INCOMES
bad for economic growth, lower s.o.l. - INCREASED ADMINISTRATION /TRAINING COST
bad for employer - SOCIAL PROBLEMS DECREASE
more people are employed
define underemployment !
…a situation whereby a factor of production (e.g. labour), though not actually unemployed, is working below capacity.
give an example of underemployment!
a PhD graduate in analytical chemistry who is unable to find work and instead is working as a waiter. their training skills and qualifications are not being utilized to the maximum.
a son/daughter in their family’s business while they are waiting for a job elsewhere may be underemployed. ( i.e. the sales of the business do not increase as a result of their employment)
why is Ireland attracting many multinationals and foreign direct investment ? (FDI)
- AVAILABILITY OF SKILLED, ENGLISH-SPEAKING WORKFORCE
reduces tainingcosts for firms - LOW RATES OF TAXATION
one of the lowest rates of corporation tax in EU - ACCESS TO EU MARKET/ MEMBER OF THE EU CURRENCY
free movement within the EU, international transaction becomes much easier - AVAILABILITY OF STATE INCENTIVES
attractive grants and other incentives by the industrial development authority - GOOD INDUSTRIAL RELATIONS
partnership agreement, social relations - less strikes, no lost tax,…
why do many multinationals exit Ireland?
loss of FDI
- LOWER WAGE RATES OUTSIDE
statutory min. wage and social partnership in Ireland result higher wages, firms may move to Eastern Europe and Asia - SKILLS MISMATCH
labour is not equipment with specific skills a firm is losing for - RISING COSTS OF PRODUCTION
make exports less competitive - ACCESSION OF NEW EU MEMBER STATES
transport costs out of Ireland are higher, as it is an island - REGULATORY FRAMEWORK
less laws in Eastern Europe and Asia - ADVANCES IN INTERNATIONAL COMMUNICATION.
global communication, lower unit cost, increases their profits - COST OF LIVE, UNCERTAINTY IN TAX, LAW, BREXIT, …
What is the statutory minimum wage?
the lowest wage that an employer must pay a member of staff.
there are some exceptions to the payment of the statutory minimum wage:
- employees under the age of 18
- family members employed in a business
what are the advantages of lowering the minimum wage in Ireland ?
- LOWER LABOUR COST
continued production, less business closure - LOWER SELLING PRICES
falling production costs - lower consumer prices - increased competition - INCREASED DEMAND/ PROTECTION OF JOBS
- INVESTMENT STIMULUS
reduced costs - increased investment by entrepreneurs, increased FDI - REDUCED RISK OF RELOCATION
Irish wage levels may be similar to other countries - firms would stay in Ireland
what are the disadvantages of lowering the minimum wage in Ireland ?
- REDUCED STANDARD OF LIVING
lower income - less disposable income - REDUCED AGGREGATE DEMAND/ SPENDING
reduced spending, falling demand, unemployment, less VAT receipts - WORKERS ON LOWER INCOMES SUFFER MOST
only those on the min wage rate suffer, not equitable - DISCOURAGE EMPLOYMENT
greater participation in the black/ shadow economy, no motivation
