Employment and unemployment

Question 1

what is claimant count?

Answer 1

number of people officially claiming unemployment- related benefits- must actively seeking work

Question 2

what is labour force survey?

Answer 2

all those actively seeking and available for work, whether or not they are claiming benefit

Question 3

what is long-term unemployed?

Answer 3

people unemployed for at least one year

Question 4

what is labour force?

Answer 4

the number of people of working age who are able, available and willing to work

Question 5

what is full employment?

Answer 5

when there’s enough infilled job vacancies for all the unemployed to take work

Question 6

what are discouraged workers?

Answer 6

people out of work for a long time who may give up on job search and effectively leave the labour market

Question 7

what does economically inactive mean?

Answer 7

those who are of working age but neither in work nor actively seeking paid work

Question 8

what is employment rate?

Answer 8

the percentage of the population of working age in full-time or part-time paid work

Question 9

what is the unemployment rate?

Answer 9

percentage of the economically active population who are unemployed

Question 10

what is the natural rate of unemployment?

Answer 10

the rate of unemployment when the labour market is in equilibrium. it is unemployment caused by structural factors such as frictional unemployment and structural unemployment.

Question 11

what is frictional unemployment?

Answer 11

unemployment that is usually short-term and occurs when a worker switches between jobs.

• a job vacancy exists
• a friction in the labour market prevents the unemployed from filling the vacancy
• number of unfilled job vacancies can be used as a measure of the level of frictional unemployment

Question 12

what is structural unemployment?

Answer 12

occurs when the demand for labour is less than the supply of labour in an individual labour market

Question 13

long-term unemployment results from the structural decline of industries due to what?

Answer 13

1. inability to complete or adapt to new demand of products
2. emergence of more efficient competitors in other countries
3. changing skill requirements

Question 14

what are some barriers to successfully getting new jobs?

Answer 14

• new jobs may require specific skills and extra qualification
• jobs might need additional training can be costly
• high cost of/availability of childcare + commuting
• unaffordable housing
• many jobs are relatively low-paid jobs and offer insecure incomes

Question 15

what does geographical immobility of labour mean?

Answer 15

refers to barriers that prevent people moving from one area to another to find work.

• difficult to shift workers from profession to profession
• family, social ties
• financial costs of moving house
• migration controls

Question 16

what does occupational immobility of labour mean?

Answer 16

inability to switch between different occupations, affected by level of transferable skills and educational requirements for jobs. often limited skills that are not very transferable

Question 17

when does cyclical unemployment occur?

Answer 17

when there is a negative output gap, linked to economic cycle. indicates that demand is low

Question 18

is cyclical unemployment permanent?

Answer 18

it is temporary and self-correcting provided that markets are sufficiently competitive and prices and wages are both flexible

Question 19

what is seasonal unemployment?

Answer 19

occurs when workers are laid off on a short-term basis at certain times of the year

e. g.
- tourism
- agriculture
- catering
- building

Question 20

what is real wage?

Answer 20

the purchasing power of the money/nominal wage. real wage falls when inflation is higher than the rise in nominal wage rate

Question 21

what is real wage unemployment?

Answer 21

unemployment caused by real wages being stuck above the equilibrium real-wage

Question 22

what does money wage rigidity consist of?

Answer 22

1. money illusion- workers will resist any move for cut in money wages though they might accept fall in real wages bought about by a rise in prices of commodities
2. wage fixation through contracts- little possibility of changing money wages
3. minimum wage laws- intervention by government in fixing minimum wages below which employers are not permitted to pay wages to the workers
4. efficiency wages- employers are not interested in lowering wages as high wages make workers more efficient and productive

Question 23

benefits of falling unemployment:

Answer 23

• increased employment, boosts real GDP, helps to lift living standards, demand
• more people in work, creates tax revenue for government to lower the deficit or increase spending
• social costs of unemployment are severe, so cutting it has huge social and economic benefits

Question 24

disadvantages of falling unemployment:

Answer 24

• extra spending from expanding labour market might worsen the current account
• risk of an acceleration in demand-pull and cost-push inflationary pressures
• fewer spare labour will mean a rise in unfilled vacancies

Question 25

causes of high youth unemployment:

Answer 25

1. skills gaps- may not be willing to employ people who cant read and write
2. reluctant employers- may prefer older, more experienced workers
3. falling retirement rates- caused by declining pension incomes so less jobs for young people
4. weak macro fundamentals- i.e. low real GDP growth and low business confidence

Question 26

policies to increase labour demand:

Answer 26

1. macro stimulus policies- low interest rates and policies to increase business lending, depreciation in exchange rate, infrastructure investment projects
2. cutting cost of employing workers, reductions in national insurance contributions, financial support for apprenticeship programmes
3. competitiveness policies- reductions in corporation tax, tax incentives for research/innovation spending, enterprise policies to lift rate of new business start-ups

Question 27

policies to increase labour supply:

Answer 27

1. reducing occupational mobility- better funding for training, teaching new skills, expansion of apprenticeship/internship programmes
2. improving geographical mobility- rise in house building keep property prices lower + encourage affordable rents, active regional policy to create new jobs and business
3. stimulate stronger work incentives- higher minimum wage or living wage, reductions in income tax/national insurance, welfare reforms to reduce risk of poverty trap