Employment and Unemployment (Up Learn)

Question 1

How does Unemployment happen?

Answer 1

New advanced machinery didn’t need workers anymore so they were fired and their living standards fell. Installed efficient machines so they wouldn’t have to pay slower workers higher wages when lower output.

Question 2

Working Age Population

Answer 2

16 - 64. Under 16s have to stay in school and over 64 retire and get their pensions.

Question 3

Working Age Population divisions

Answer 3

Active and Inactive

Question 4

Active Population = Economically Active

Answer 4

People of working age who are able to work and actively seeking work or are actively working already.

Question 5

Inactive Population = Economically Inactive

Answer 5

People of working age who aren’t able to work and aren’t actively seeking work.

Question 6

Unemployment

Answer 6

Able to work and actively seeking work but currently not working.

Question 7

Unemployment Level

Answer 7

No. of people unemployed.

Question 8

Unemployment Rate

Answer 8

% of people unemployed out of the active population.

Question 9

Employment Rate

Answer 9

% of working age population that are employed

Question 10

Activity Rate/Participation Rate

Answer 10

% of working age population are actively seeking work or actively working

Question 11

Active Population equals?

Answer 11

Employed + Unemployed

Question 12

Working Age Population equals?

Answer 12

Active + Inactive

Question 13

Why would Employment Rate Fall?

Answer 13

1) Employed people fell

2) Working age population rose

Question 14

Why would Unemployment Rate Fall?

Answer 14

1) Unemployed people fell

2) Active population rose

Question 15

How would unemployment level increase without affecting employment level?

Answer 15

If there is an increase in immigration. If people people move to the UK from abroad and can’t find a job, they will increase UL without affecting EL. Or there could be economically inactive people but have started actively seeking work.

Question 16

How to measure Unemployment

Answer 16

1) ILO Labour Force Survey

2) Claimant Count

Question 17

ILO Labour Force Survey

Answer 17

80000 households are interviewed or surveyed on phone every quarter to ask if they are unemployed. Unemployed if out of work for 4 weeks and is ready to start a job in next 2 weeks. Then it’s used to estimate unemployment rate and level for whole of UK.

Question 18

Claimant Count

Answer 18

Measures how many people are claiming unemployment benefits. That is how many people are unemployed. Done monthly.

Question 19

Limitations of ILO LFS

Answer 19

1) Inaccurate estimate of unemployment across the UK. There are 27 million households and only 80000 households are surveyed
2) Time consuming and costly
3) Conducted quarterly so won’t pick up changes in labour market fast

Question 20

Limitations of CC

Answer 20

1) Not everyone who is unemployed will claim unemployment benefits. This underestimates unemployment.

Question 21

Underemployment

Answer 21

When employed but working fewer hours than they want to or underusing their skills.

Question 22

Causes of Unemployment

Answer 22

1) real wage unemployment/classical unemployment
2) demand deficiency/cyclical unemployment
3) structural unemployment
4) frictional unemployment
5) seasonal unemployment

Question 23

Real Wage Unemployment/Classical Unemployment

Answer 23

When wage is above equilibrium wage and so there is a high supply of labour but a low demand for it. Creates excess supply of labour : unemployment. Shown on Quantity labour against wages graph.

Question 24

Reasons for Real Wage Unemployment

Answer 24

Government set a national minimum wage meaning workers can’t get paid below that. If workers are getting paid lower than NMW then they would demand higher for NMW i.e. above equilibrium. Also trade unions (going on strike) can push wages above equilibrium.

Question 25

Demand Deficiency/Cyclical Unemployment

Answer 25

No one wants to buy anything, firms production decreases, less workers, derived demand for labour decreased, demand deficient unemployment. Shown on LRAS graph.

Question 26

Structural Unemployment

Answer 26

Structure of economy changes (from farming to factories) and jobs shift from one sector to another

Question 27

Reasons for Structural Unemployment

Answer 27

Occupational Immobility and Geographical Immobility

Question 28

Occupational Immobility

Answer 28

When workers can’t move between different jobs because they lack the skills needed. Gov can help by providing education, training and apprenticeships to teach new skills and help workers find jobs in new sectors. If gov doesn’t intervene it would lead to structural unemployment.

Question 29

Geographical Immobility

Answer 29

When workers struggle to move between different areas. Gov can intervene by improving transport. If gov doesn’t intervene, it would lead to structural unemployment.

Question 30

Frictional Unemployment

Answer 30

When temporarily unemployed whilst job searching.

Question 31

Seasonal Unemployment

Answer 31

When people only work for a particular season. A summer tourist would only work in the summer but in the winter she is unemployed.

Question 32

Migration

Answer 32

Increased migration = increased jobs. Immigrants come to UK to work and are of working age and get low skilled jobs. Less likely to claim benefits than existing population.
Also, lower wages meaning supply of labour increases and so price equilibrium of labour is reduced.

Question 33

Skills

Answer 33

When structural unemployment, if firms don’t train staff, gov has to step in to correct market failure but it’s costly. Migrants might fill in those shortages.

Question 34

Impacts of Unemployment

Answer 34

1) Workers have loss of income and suffer from stigma when signing up for benefits
2) Firms would have a smaller pool of skilled people because the long term unemployed would lose their skills. Give low wages as well
3) Local shopping centres don’t offer the range of shops available to those in areas of low unemployment so less choices for consumers
4) Gov would spend a lot of money on families out of work when it could be spent elsewhere.