Employment and unemployment

Question 1

What are the 5 key employment indicators?

Answer 1

1. Labour force
2. Labour force participation rate
3. Employment by industrial sector
4. Employment status
5. Unemployment

Question 2

Define

labour force

Answer 2

The working population or economically active population of a country, that make up the total supply of labour in the economy.

This includes people who are unemployed but looking for work.

Question 3

Define

dependent population

Answer 3

That part of a population that is economically inactive (not in paid employment) and therefore relies on others to produce the goods and services it consumes.

Question 4

Define

labour force participation rate

Answer 4

The labour force as a proportion of the total working-age population, i.e.

(labour force/working-age population) x 100

Question 5

What recent trends have been seen in the labour force participation rate?

Answer 5

• Globally, the rate has fallen slightly due to the increasing number of younger people in education and the growing number of old and retired people in developed countries
• In some developing countries, participation rate has increased as poverty forces people to seek paid work rather than do their own farming
• Rising living costs force people into work to maintain living standards
• Female participation rates have increased due to:
  
  • changing social attitudes
  • more part-time jobs becoming available
• Male participation rates have decreased as male-dominated sectors are shrinking

Question 6

What recent trends have been seen in the employment by industrial sector?

Answer 6

• In general, primary and secondary industries are shrinking, tertiary sector is expanding - this is due to increased mechanisation of primary and secondary sectors
• In developed countries (MEDCs), employment in secondary industries continues to decline and more people are employed in services
• In newly industrialised countries (NICs), secondary industries are expanding rapidly
• In developing countries (LEDCs) agriculture continues to dominate employment

Question 7

What problems are there with the changing industrial structures?

Answer 7

• The loss of jobs from agriculture, mining and manufacturing industries has increased unemployment in some cases
• The decline of employment in agriculture means that many people have moved from rural to urban areas, increasing demand for energy, increasing car use and causing overcrowding.

Question 8

Define

full-time employment

Answer 8

A contract for work that involves the employee working the full number of hours defined by his or her employer as a working week, which is normally around 40 hours each week between Monday and Friday.

Question 9

Define

part-time employment

Answer 9

A contract for work in which an employee’s working time is substantially less than a full working week.

Question 10

What recent trends have been seen in employment status?

Answer 10

• Most workers, especially males, are in full-time employment
• There has been a rapid growth in part-time employment due to
  
  • increased female participation, so women can balance family and working commitments
  • increased growth in the services sector, particularly in retailing. Hiring part-time workers allows greater flexibility to remain operational for more hours and to use more staff during busy periods.

Question 11

Define

unemployment rate

Answer 11

The proportion of the labour force in an economy that is out of work but seeking employment.

This is usually measured by the number of people claiing welfare or unemployment benefits. However, this is unreliable as benefits may only be paid for a short period of time, or not paid at all.

Question 12

What recent trends have been seen in unemployment rate?

Answer 12

• Globally, unemployment rate fell during the economic boom (1999-2007)
• Unemployment rate rose during the recession starting from 2008
• Almost half of the unemployed are young people as they are the least productive employees until they develop the skills and experience they need

Question 13

List 6 types of unemployment

Answer 13

1. Frictional
2. Seasonal
3. Cyclical
4. Structural
5. Regional
6. Technological

Question 14

Define

frictional unemployment

Answer 14

An economic situation in which people find themselves voluntarily out of work usually for short periods of time as they move between jobs.

Question 15

Define

seasonal unemployment

Answer 15

Joblessness resulting from seasonal downturns in demand and economic activity in particular industries, such as in tourism, agriculture and construction.

Question 16

Define

cyclical unemployment

Answer 16

Joblessness caused by deficient demand during an economic downturn or recession.

This is an example of the multiplier effect, where a relatively small change in expenditure (in this case, in aggregate demand) causes a greater and more widespread change in output and income.

Question 17

Define

structural unemployment

Answer 17

Joblessness among workers because their skills are out of date and no longer wanted due to changes in demand patterns or technologies that have resulted in the decline of some established industries in an economy.

Main causes:

1. permanent fall in demand for products (structural cange in demand)
2. production is moved overseas to reduce costs
3. agriculture and manufacturing become more capital-intensive - workers in developed countries are mostly employed in services

Question 18

Define

regional unemployment

Answer 18

Unemployment that is disproportionately concentrated in a particular region in an economy.

Can be caused by structural unemployment if most of the firms in the affected industries are located in one particular area.

Question 19

Define

technological unemployment

Answer 19

Joblessness caused by the substitution of labour in production processes by modern, capital equipment.

However, this is not necessarily a bad thing as these unemployed workers can be retrained and reallocated to other uses

Question 20

List 6 imperfections in the labour market that may restrict employment oppurtunities and disrupt the efficient allocation of resources.

Answer 20

1. Powerful trade unions may force up wages
2. Unemployment benefits may reduce the incentive to work
3. Other employment costs can reduce the demand for labour
4. A lack of information can prevent people from finding jobs
5. Minimum wage legislation may reduce labour demand
6. Labour immobility prevents workers from finding new jobs

Question 21

Describe (1) how powerful trade unions may force up wages, and (2) the consequences of this.

Answer 21

1. Restricting the supply of labour by insisting all workers belong to the union or by threatening to take industrial action
2. As costs rise, employers may reduce their demand for labour, unemployment may increase

Reducing the bargaining power of trade unions may allow wages to fall and employment to rise

Question 22

Explain how the payment of unemployment benefits may disrupt the labour market

Answer 22

People’s incentive to seek paid employment may be reduced, so voluntary unemployment rises.

These people could be forced back to work if the benefits they receive are cut; however, this may be unfair to those people in involuntary unemployment.

Question 23

Define

occupational immobility

Answer 23

The inability of workers to move easily between from one occupation to another because they lack the skills required. It is often a feature of structural unemployment.

Question 24

Define

geographical immobility

Answer 24

The inability of workers to move location to take a new job because of family ties and commitments (e.g. children at school), or regional differences in house prices that make it unaffordable

Question 25

List the costs of unemployment

Answer 25

Personal costs:

• loss of income
• long-term loss of skills
• emotional costs (possible loss of self-esteem, leading to depression, health and marriage problems, and crime)

Fiscal costs (costs to the government):

• loss of income tax revenue
• higher public spending on unemployment and welfare benefits
• other public expenditure may be reduced, leading to lower incomes and living standards

Costs to the economy:

• unemployment is a waste of resources: output is lower than what it could otherwise be
• taxes may have to rise to pay for increased welfare payments
• oppurtunity cost of paying benefits