Employment And Unemployment Flashcards
Measures of unemployment
-It is usually difficult to measure unemployment. Some of those in employment might claim unemployment related benefits, whilst some of the unemployment might not reveal this in a survey.
The two main measures of unemployment in the Uk are
-The claimant count
-the international labour organisation (ILO) and the UK labour force survey (LFS)
The claimant account
-counts the number of people claiming unemployment related benefits, such as Job Seekers Allowance (JSA). They have to prove they are actually looking for work.
Evaluating the claimant account
Not every unemployed person is eligible for, or bothers claiming the JSA. Those with partners on high incomes will not be eligible for the benefits, even if they are unemployed. Although there may be cases of people claiming the benefit whilst they are employed, the method generally underestimated the level of unemployment.
The international labour organisation (ILO) and the UK labour force survey (LFS)
The LFS is taken on by the ILO. It directly asks people if they follow these criteria:
-Been out of work for 4 weeks.
-Able and willing to start working within 2 weeks
-Workers should be available for 1 hour per week. Part time unemployment is included.
Since the part time unemployed are less likely to claim unemployment benefits, this method gives a higher unemployment figure than the claimant account.
The distinction between unemployment and underemployment
-The unemployed are those able and willing to work, but are not employed. They are actively seeking work and usually looking to start within the next two weeks
-The underemployed are those who have a job, but their labour is not used to its full productive potential. Those who are in part-time work, but are looking for full time jobs are underemployed.
The significance of changes in the rates of and the effects of unemployment and employment to consumers
If consumers are unemployed, they have less disposable income and their standard of living may fall as a result.
There are also psychological consequences of losing a job, which could affect the mental health of workers.
The significance of changes in the rates of and the effects of unemployment and employment to firms
With a higher rate of unemployment, firms have a larger supply of labour to employ from. This caused wages to fall, which would help firms reduce their costs.
However with a higher rate of unemployment, since consumers have less disposable income, consumer spending falls so firms may lose profits. Producers which sell inferior goods may see a rise in sales. It might cost firms to retrain workers, especially if they have been out of work for a long time.
The significance of changes in the rates of and the effects of unemployment and employment to workers
With unemployment there is a waste of workers resources. They could also lose their existing skills if they are not fully utilised. Those in jobs are likely to see a fall in their wages as supply of labour increases.
The significance of changes in the rates of and the effects of unemployment and employment to the government
If the unemployment rate increases, the government may have to spend more on JSA, which incurs opportunity cost as the money could have been spent elsewhere.
The government would also receive less revenue from income tax, and from indirect taxes on expenditure, since the unemployed have less disposable income to spend
The significance of changes in the rates of and the effects of unemployment and employment to society
There is an opportunity cost to society, since workers could have produced goods and services if they were employed. There could be negative externalities in the form of crime and vandalism, if the unemployment rate increases.
The significance of changes in the rates of and the effects of inactivity
The economically inactive are those who are not actively looking for jobs. These could include carers for the elderly, disabled or children, or retired. Some workers are discouraged from the labour market, since they have been out of work for so long they have stopped looking for work. If the number of the economically inactive increase, the size of the labour force may decrease, which means the productive potential of the economy may fall.
The causes of unemployment-structural unemployment
This occurs with a long term decline in demand for the goods and services in an industry, which costs jobs. In the UK, this has included job losses in industries such as car manufacturing, coal and ship building.
This type of unemployment is worsened by the geographical and occupational immobility of labour. If workers don’t have the transferable skills to move to another industry, or if it is not easy to move somewhere jobs are available, then those facing structural unemployment are likely to remain unemployed in the long run.
Globalisation contributes to structural unemployment, since production in the manufacturing sectors, such as in clothing or motor cars, moves abroad to countries with lower labour costs. Technological change also contributes as workers began to be replaced by machinery.
The causes of unemployment-Frictional unemployment
This is the time between leaving a job and looking for another job. It is common for there to always be some frictional unemployment, and it is not particularly damaging since it is only temporary. For example, it could be the time between graduating university and finding a job.
This is why it is rare to get 100% employment:there will always be people moving between jobs.
Causes of unemployment-Seasonal unemployment
This occurs during certain points in the year, usually around summer and winter. During the summer, more people will be employed in the tourist industry, when demand increases.
Causes of unemployment-Demand deficiency (cyclical unemployment)
This is caused by a lack of demand for goods and services, and it usually occurs during periods of economic decline for recessions. Firms are either forced to close or make workers redundant, because their profits are falling due to decreased consumer spending, and they need to reduce their costs. This then causes output to fall in several industries.
This type of unemployment could actually be caused by increases in productivity, which means each worker can produce a higher output, and therefore fewer workers are needed to produce the same quantity of goods and services.
