Labour Market policy Flashcards
Why is it difficult to interpretate the concept unemployment?
Due to measurement problems (various methods of calculating, the division between
unemployment and labour and inactivity is vague, a multitude of
unemployment concepts)
What is the ILO-definition of an unemployed person?
Someone... (1) who is not working, (2) who is immediately available for a job (3) who is actively looking for it
When do problems arise and why when using the ILO-definition?
Problems arise with the practical implementation of each of the conditions
Also, it has to be decided what the relevant
labour force is to which the number of unemployed is related
What did the crisis in 1970 trigger regarding unemployment?
From the 1970s onwards, the sharp rise in
unemployment in the advanced economies
following the oil price shocks triggered a
considerable research effort into the causes
of and solutions to the problem.
This was followed up politically by various
measures to combat unemployment.
What are the individual costs of unemployment?
Lost income
Considerable psychological consequences
Distribution of income
among the population deteriorates
What are the costs of unemployment for the economy?
A loss of economic activity
Distortionary
effects, such as the taxation of labour, which in turn can destroy employment.
More crime and
vandalism in ares of high unemployment
What did Pigou have to say about unemployment?
According to the classical economist Pigou, it was always voluntary as there would be no
unemployment if the unemployed were to accept lower wages
What is disequilibrium unemployment?
When real wages rise above
their equilibrium level, disequilibrium unemployment arises.
What did Keynes have to say about unemployment?
Keynes saw this disequilibrium
unemployment rather as an involuntary state brought about by a lack of demand for goods
How is ‘classic or cyclical unemployment’ best described?
Unemployment due to too high a real wage cost or too little economic activity has since then
been known as classic or cyclical unemployment, respectively
What is the theory or explaining for classical unemployment?
When real wages rise above their equilibrium level,
classical unemployment emerges
High real wages create a large labour supply on the one hand, while on the other hand it is no longer profitable for employers to hire employees for whom the wage cost exceeds the
marginal revenue or productivity
What is the theory or explaining for cyclical unemployment?
Keynesian or cyclical unemployment is caused by a decline or slowdown in economic activity
What is frictional or search unemployment?
This is the short-term unemployment that arises when
people are searching for, or changing, a job
Even in an equilibrium situation, some unemployment remains
What is structural unemployment?
This has
to do with the fact that the supply of labour is not adapted to demand or reacts too slowly to
changes in demand.
What are the possible reasons for structural employment?
Socio-demographic factors & poor matching between vacancies and jobseekers
Yet, in practice, structural unemployment
consists for the most part of a hard core of long-term unemployed
