Employment and Unemployment Flashcards
What defines being in employment?
Individuals aged 16 and over who are in paid work, whether as employees or self-employed
What defines being economically inactive?
Individuals not in employment who have not sought work in the past four weeks and/or are not available to start work in the next two weeks
What are discouraged workers?
People who have been unable to find employment and who are no longer looking for work
They are part of those who are economically inactive
What generally defines economically inactive?
Economically inactive includes all those people of working age who do not have a job and are not looking for a job
Why is full employment a core macroeconomic policy objective?
Having large numbers of people without jobs means that the economy is not making the best use of its labour resources and is sacrificing potential output that could be produced
Why will there always be people unemployment?
Frictional and Seasonal Unemployment
Why is it not desirable to have the economy operating close to full capacity?
If the economy were to be operating very close to full capacity, this would be likely to put upward pressure on wages and thus prices. There would be conflict between achieving full employment and maintaining the stability of prices
What does full employment really mean?
Full employment does not mean that unemployment will be zero but at a higher percentage
How was unemployment measured before?
The measure of employment was the claimant count of unemployment by measuring the number of people registered as unemployed and claiming unemployment benefit (Jobseeker’s Allowance) (JSA)
How does someone claim JSA?
People claiming JSA must declare that they are out of work, available for, and actively seeking work, during the week in which their claim is made
What is a problem for using the claimant count to measure unemployment?
People claiming JSA may include people who are claiming benefit but not actually prepared to work
It also excludes people who would like to work and looking but not eligible for unemployment benefit
What is the current measure of unemployment?
ILO unemployment rate is a measure based on the Labour Force Survey. This identifies the number of people available for work, and seeking work, but without a job.
How does the ILO unemployment rate define an unemployed person?
Without a job, want a job, have actively sought work in the last four weeks and are available to start work in the next two weeks
Out of work, have found a job and are waiting to start in the next two weeks
What are the disadvantages of the ILO unemployment data?
They are sample evidence, and extrapolated up to give the picture for the UK as a whole. The samplee cannot be guaranteed to be fully representative
Why is measuring a developing countries unemployment even more difficult?
No social secuirty system means unemployed workers have no incentive to register as being unemployed
People cannot find jobs they are qualified for and take second-choice jobs: this is underemployment
What is underemployment?
People who are unable to work as many hours as they want or are overqualified for their jobs
What is the formula for unemployment rate?
Unemployed///Economically Active
What defines unemployed?
The unemployed are those who are in the workforce seeking jobs, but who are without jobs
What is the formula for employment rate?
Employed///Working Age Population
What is the formula for inactivity rate?
Not in Labour Force///Working Age Population
What is frictional unemployment?
Short-term unemployment occurring when individuals are between jobs
What is structural unemployment?
Arises from a mismatch between workers’ skills and job requirements, often due to technological changes or shifts in the economy
What is cyclical/demand-deficient unemployment?
Resulting from reduced demand for goods and services during economic downturns
What is seasonal unemployment?
Occurs when demand for labour fluctuates seasonally (agriculture, tourism)
What is real wage inflexibility?
When wages are too high, leading to job cuts, or an unwillingness to hire
What are the issues with the Labour Force Survey?
Sampling Errors
Non-response Bias
Unrepresentative
Self-reported Data
What are the three parts of structural unemployment?
Occupational Immobility
Geographical Immobility
Globalisation
What is hysteresis?
The process whereby a variable does not return to its former value when changed
Why is hysteresis a risk with trade cycle?
For the trade cycle, hysteresis describes that it fails to return to its former long term trend rate of growth after a severe recession
What do wage regulations lead to?
Wages above equilibrium level
Excess supply of labour or unemployment
Where is the total of unemployed people on the supply demand diagram?
Difference between initial equilibrium quantity and excess supply quantity
What are the benefits of employment?
Employment leads workers to earn an income to spend on goods and services, stimulating demand, drive business growth, and generates tax revenues. This is the multiplier effect
What are 2 example benefits of employment?
Continuous employment develops workers skill
Employment drives demand which motivates investment
How can the government increase employment?
Bring women into workforce
Increase the age of retirement
Make it harder to receive benefits
Immigration Policies
Why are skilled workers significant?
More employable which reduces impact of economic shocks and declining industry
More productive capacity
What are the implications of lack of skills on employment or unemployment?
Lowers occupational mobility
Limits workers to area where demand for skillset
Increases unemployment rate (structural)
What is migration?
Migration refers to the movement of people from their usual place of residence to a new place of residence, either internal migration or international migration
What is the impact of migration on employment and unemployment?
Brings skills, labour, and diversity to economy
Addresses labour shortages by increasing labour force
High-skill improves innovation, productivity, competitiveness
Increase in labour supply lowers wages
What are the costs of unemployment?
Loss of potential output
Decreased consumer spending
Reduced tax revenue
Increased government spending on benefits
Reduced investment
Greater discouraged workers
Increased relative poverty
