Employment and Unemployment

Question 1

Define unemployment

Answer 1

People who are willing to work, able to work and actively seeking work but currently don’t have a job

Question 2

Name and describe the 2 ways to measure unemployment

Answer 2

1.Claimant count
-measures the number of people receiving unemployment benefits

2. ILO (International Labour Organisation) Labour Force Survey
   -People of working age who have been unemployed in the last 4 weeks and are ready to work within the next 2 weeks

Question 3

Give reasons why there may be difference in the results of the 2 different measurements of employment

Answer 3

-Some unemployed people may not be eligible for benefits if their partner is working
-Some people might not want to claim benefits due to social stigma
-Claimant count doesn’t take into account the underemployed

Question 4

Define underemployment
(give examples)

Answer 4

Underemployment refers to a situation where individuals are employed but not fully utilised in terms of their skills, experience, or availability.

-Skills mismatch (under/over qualified)
-Part-time worker seeking full-time work
-Under-utilised hours

Question 5

Define the following terms:
1.Economically Active
2.Economically inactive
3.Employment Rate
4.Unemployment Rate
5.Participation Rate

Answer 5

1.Economically active:
Total number of employed and unemployed people

2.Economically inactive:
Not in employment, not able to work or actively seeking work

3.Employment Rate:
proportion of working age population that are in employment

4.Unemployment Rate:
Proportion of economically active population that are unemployed

5.Participation Rate:
Proportion of working age population that are economically active

Question 6

Define the 5 types of unemployment

Answer 6

1. Frictional unemployment:
   -when workers are unemployed when in between jobs (uni students who just graduated)
2. Seasonal unemployment:
   Occurs when certain industries or jobs are only available at specific times of the year.
3. Structural Unemployment:
   Occurs when there is a mismatch between the skills of workers and the jobs available in the economy, due to changes of structure in that industry
4. Cyclical Unemployment:
   -When AD decreases, there is a decrease in the derived demand for labour
5. Real-wage unemployment:
   When the wage rate is above the equilibrium wage rate, there is a surplus in supply so there’ll be unemployment as a result

Question 7

Effects of unemployment on the government

Answer 7

-Higher benefits spending
-fall in income tax revenue
-worsened budget deficit

Question 8

Effects of unemployment on consumers

Answer 8

-Stores may have to close down, leading to less variety and choice

Question 9

Effects of unemployment on workers

Answer 9

-Loss of skills
-Loss of income
-Lower morale/confidence
-Cope with the stigma of being unemployed

Question 10

Effects of unemployment on producers

Answer 10

-fall in profits (depending on XED of product)
-can offer lower wages
-increased recruitment pool