Employment and Unemployment

Question 1

state and explain two ways that unemployment can be measured.

Answer 1

claimant count:
- the number of people claiming job seekers allowance.

labour force survey:
- quarterly survey of approximately 60,000 households compiled by the office of national statistics studying the employment circumstances of the UK population.

Question 2

explain what is meant by structural unemployment.

Answer 2

• this occurs when long term shifts in the structure of the economy impact upon the job market.
• structural unemployment tends to increase in line with the pace of globalisation
• workers will need to re-train and gain new skills in order to find employment which will take time and could be costly.

Question 3

explain what is meant by seasonal unemployment.

Answer 3

• this occurs when workers are employed at different times of the year
• this tends to happens in seasonal industries such as tourism and farming

Question 4

explain what is meant by frictional unemployment.

Answer 4

• occurs when workers move between jobs
• often exists because workers do not have perfect and immediate information about every job opportunity that may be available to them.

Question 5

explain what is meant by cyclical unemployment.

Answer 5

• occurs when economic growth is below its trend or average rate.
• it indicates that demand is low
• government will try to alleviate problems by stimulating aggregate demand.

Question 6

state and explain the causes of unemployment.

Answer 6

technological:

• occurs when improved capital, which may be more productive and efficient than labour so replaces labour as a factor of production
• this means workers are constantly being replaced

real wage inflexibility:

• real wage rates are above the equilibrium wage rate
• this causes the supply of labour to be greater than the demand for labour:
  
  • workers will supply more of their services at higher wage rates
  • however, firms will demand less workers as the wage rate it too high

Question 7

state and explain the consequences of unemployment.

Answer 7

lower living standards:
- the unemployed will have lower incomes, meaning a reduced standard of living

de-skilling:
- the longer you are unemployed, the more de-skilled you become as workplace skills are not developed.

reduced chances of finding work:
- the longer you are unemployed, the less likely you are to find a job.

Question 8

explain how government policies can reduce unemployment.

Answer 8

fiscal:

• leads to increased spending to stimulate the economy
• reduced taxes will provide a greater incentive for individuals to work

monetary:

• lower interest rates will see more borrowing
• saving becomes less attractive

supply-side:

• leads to increase in the supply of factors of production leading to lower prices and greater productivity
• increased spending on training and education will provide a skilled workforce with better understanding of their job roles.