Employment, Unemployment, The Labour Market Flashcards
What is Full Employment?
It is the state where all those who are members of the labour force, who are able and are willing to work at existing wage levels, are employed (have a job). It is benchmarked at an unemployment rate of 4%. (Irelands unemployment rate currently stands at a figure of 4.4%).
How do you define, and calculate the unemployment rate?
The unemployment rate accounts for the proportion of the labour force who are currently unemployed. It is the number of those employed, divided by the number of those in the labour force, multiplied by 100.
Explain the term underemployment.
Underemployment occurs when the skills/qualifications of a worker are not being utilised to their full potential. An example would be a highly educated and qualified family member helping out in their family business, like a farm. Another example would be a highly qualified worker working in. A job completed unrelated to their expertise.
How can unemployment be measured?
The Live Register: this is seen to be a less accurate measure of unemployment as it is a count of those who receive unemployment related pay rather than a count of those who are actually unemployed. Those who work part time are legally entitled to receiving a partial social welfare payment, though they are not classified as unemployed. Those who log on to receive PRSI earnings are also not unemployed, making this measure of unemployment further inaccurate. Criminals operating in the hidden economy can log onto live register, as well as those who are between jobs (frictional unemployment). It does however give an indication of unemployment levels and trends within the labour market.
The Labour Force Survey (LFS): this is seen to be a more accurate measure of unemployment as a large sample of citizens (over 32,500 each quarter) are surveyed, which significantly decreases the standard error of the mean (because the sample is greater than 30). Though there is a time lag between the publication of the results and the quarter in which the survey was set out, it is still the more reliable measurement of unemployment.
What is structural unemployment
This occurs when there is a mismatch between the skills a person seeking employment has, and the labour that is in demand in an economy. It can occur when there is a decline in an industry due to changing demand, Eamonn Ryan shitting down peat harvesting in the midlands created structural unemployment. It can also occur when a job becomes obsolete/replaced b y technology, for example, a checkout operator in. A supermarket being replaced by a self service checkout (technological unemployment).
What is frictional unemployment?
This is unemployment caused by frictions in the labour market. It is as a result of transitions between jobs taking longer because of these frictions, and refers to individuals who are between jobs, who have left one job and are now seeking another (job contact has ended), or those who are new to the labour market and seeking work. There is little the government can do to address this type of unemployment, hence why government policies that aim to reduce unemployment fail to address this aspect.
What is seasonal unemployment?
This is unemployment caused by the fact some labour is only in demand during certain seasons of the year. For example, ice cream is in high demand during the summer months so during the winter months those working in an ice cream parlour may find themselves unemployed. This is also significant within the tourism industry.
What is cyclical unemployment?
This is unemployment caused by the reduction in demand for goods and services as a result of a downturn/contraction within an economy. As the economy expands and demand for goods and services increases, so does employment, and as demand for goods and services fall, employment also falls. For example, unemployment rose in 2008 due to the downturn of the Irish economy caused by the financial crisis. Similarly, in 2020, unemployment rose as demand for goods and services fell.
Explain why unemployment may rise.
-A rise in the cost of labour: in January 2021, the minimum wage stood at €10.20 an hour. 2 yeas on in 2023, it was raised to €11.30 an hour. This can cause redundancies as employers struggle to pay their staff. An employer who employed 100 workers at the previous wage rate, can now only afford 90 workers at the new wage rate (1020 divide 11.30). This therefore, causes unemployment.
-High interest rates: when the ECB decide to raise interest rates (to curb inflation), the cost of borrowing goes up and consumer spending is encouraged. This causes a fall in demand in an economy, leading to economic slowdown and rising unemployment levels.
-Empoyers’ PRSI: aside from the contributions employees make to their PRSI, employers must make a contribution per employee also. This has been argued by employers to be a disincentive to hiring workers, as it increases the cost of labour, taking away from firm profits.
-Exchange rate fluctuations: a rise in the euro against the pound causes Irish exports to become more expensive in the UK. This causes demand for Irish goods (and other eurozone goods for that matter of fact) to fall in the UK market as they are now more expensive. Demand may also fall in the tourism industry as holidaying in Ireland is now more expensive for British tourists, this causes unemployment in the hospitality sector.
Uncertainty: following an economic shock a fall in investment and consumer spending is likely due to the unpredictable nature of the future economy. Consumer pessimism causes a fall in demand, which occurred both in 2008 following the financial crisis and 2020 due to the covid19 pandemic. This uncertainty can result in the creation of unemployment.
-Relocation of Multinational Corporations (MNC’s): over 1100 MNC’s base their headquarters here in Ireland due to our low corporation tax rate. These MNC’s are responsible for a huge proportion of Irish jobs, employing over 320,000 people in our country. If any MNC were to relocate, it would have a significant impact on local economies. For example, in 2009, Dell decided to relocate 1900 jobs from its Limerick plant to Poland, who have a lower cost of labour (low wage economy), and the convincing incentives offered by the Polish economy. When a MNC reduces its presence in Ireland, it has a huge impact on our economy.
When analysing trend graphs, what significance does the mid 1990’s-2007 have?
Unemployment began to fall towards the mid 1990’s due to the availability of a highly skilled labour force. Low wage rates attracted foreign direct investment (FDI) to Ireland, further increasing employment. FDI became more attracted to locate in Ireland after the corporation tax rate was reduced to 12.5% at the beginning of 2003. Rising incomes reduced Irish emigration and immigration increases meant more employment, particularly for MNC’s. Thus however, caused the price of housing to soar, making Ireland a very expensive nation to live in. A property boom was then fuelled by the reckless lending of financial institutions (easy access to credit) and low interest rates that accompanied the introduction of the single currency in 1999 (euro notes and coins were then introduced in 2002). The coining of this period, which is know as the ‘Celtic Tiger,’ was lead by the surge in annual economic growth rates. Property prices soared, as did employment in the construction sector simultaneously.
What is a goods and services market?
A goods and services market is a market in which individuals demand (purchase) goods and service with intent to consume them, like buying and ice cream, or getting a haircut.
These goods and services are demanded in their own right.
When analysing trend graphs, what significance does 2008-2013 have?
The financial crisis of 2008 lead to a sudden fall in the availability of credit. A fall of 80,000 units in 2006 to 8,500 units in 2012 of new homes being built was seen in the construction industry, causing unemployment.
The cost of the state bailing out financial institutions was EUR64Billion a the time. The unemployment rate surged to over 15% and consumer spending fell due to the introduction of new taxes (USC in 2011 and local property tax in 2013).
The troika (IMF,ECB and EU Commision) took control of fiscal policy. The Irish government pursued a long period of austerity measures, where they cut current government expenditure and increased government current revenue, to take control of the troika.
A public sector recruitment ban, public sector payment cuts, high taxes and lack of available jobs caused emigration to soar.
The governments solution to this was to increase FDI attraction and Irish exports which would in turn inject money back into the economy and create employment.
When analysing trend graphs, what significance does 2013-2020 have?
The economy began to recover between these years as banks slowly started lending again and FDI was on a rise, boosting Irish exports. There was a year on year increase in tourism numbers, which increased employment in the hospitality and tourism sector. A recovery in the property market meant a slow increase in the building of new homes, along with the construction of office blocks etc.
When analysing trend graphs, what significance does 2020-2021 have?
Due to COVID-19 lockdowns, unemployment took a significant rise. Economic activity became severely restricted and consumer expenditure fell significantly. Consumer savings rose by EUR14Billion in the space of a year, to amount to a figure of EUR125Billion.
What are the implications of unemployment?
The economy:
reduced consumption in expenditure: during an economic downturn there is a reduction in aggregate demand as a result in a fall of reduced disposable income. Those who are employed are at risk of potentially losing their job in the future recuse their spending and begin to save more. The demand for both domestically produced goods, as well as imports, falls.
Decrease in investment: a fall in aggregate demand as well as negative (pessimistic) future expectations for the economy causes firms to hold off on investing/expansion.
Government Finances:
Increase in current government expenditure: as unemployment rises, the need for social welfare payments also increases (job seekers allowance, housing assistance payment (HAP) etc.). This means government current expenditure rises.
Decrease in government current revenue: government current revenue derived from both direct and indirect taxation (like PAYE and VAT) decreases as people become unemployed, and hold off on spending. This fall in economic activity decreases government income.
The governments current budget deficit rises, or current budget surplus falls. The government may need to borrow money to fund a bigger deficit.
Individuals/households:
Rise in emigration: the lack of employment in Ireland is a push factor, causing people to emigrate to get a job elsewhere. This is a safety valve for the economy, as it takes pressure off the social welfare system.
*brain drain: this occurs when an individual who is educated at the cost of the taxpayer emigrate abroad as they are unable to find suitable work in Ireland.
Household incomes:
Rise in poverty levels: as unemployment rises, individuals struggle to afford basic needs like food and clothing as a result of a fall in income. Thus, rising poverty levels. Eg. During the 2008 financial crisis, the struggle some people had to make mortgage repayments resulted in their homes being repossessed by financial institutions.
Societal inequalities: lower income households may struggle to afford healthcare, education and housing. The inability to reach these essential services highlights societal inequalities.
CURRENT DEFICIT OF 250,000 HOUSES!!!!!!
