Lesson 11 - Causes Of Unemployment

Question 1

What are the 4 main causes of unemployment?

Answer 1

Seasonal
Structural
Frictional
Cyclical

Question 2

What is cyclical unemployment also referred to as?

Answer 2

Demand-deficient

Question 3

What is seasonal unemployment?

Answer 3

Regular seasonal changes in employment
Due to changes in labour demand
(Tourism, agriculture, Christmas)

Question 4

What is structural unemployment?

Answer 4

Changes to economy mean that skills do not match job opportunity

Question 5

Which concept is linked to structural unemployment?

Answer 5

Labour immobility

Question 6

What is labour immobility?

Answer 6

How difficult it is to transition from one job to another

Question 7

What is frictional unemployment?

Answer 7

Transitional unemployment due to people moving between jobs

Question 8

What is cyclical unemployment?

Answer 8

Fall/persistent weakness of aggregate demand
Leads do decline in GDP + jobs

Question 9

What is the disputed 5th cause of unemployment?

Answer 9

Real wage unemployment

Question 10

What does real wage unemployment entail?

Answer 10

Wages too high for supply + demand conditions
Minimum wage may be too high
Unions may have negotiated disproportionately high wages

Question 11

What are the 2 ways in which unemployment is measured?

Answer 11

Claimant count
Labour force survey

Question 12

How does the claimant count measure unemployment?

Answer 12

Records the number of people who claim Jobseekers Allowance
Can prove that they are seeking work

Question 13

How useful is the claimant count?

Answer 13

Not reflective of true unemployment
Not all will claim JSA
Some feel unable to prove that they are seeking work
Some may file fraudulent claims

Question 14

How does the labour force survey measure unemployment?

Answer 14

Quarterly survey of roughly 40,000 households + 80,000 individuals

Question 15

Which 3 conditions must apply to an individual in order to be classified as unemployed by the survey?

Answer 15

Out of work for 4 weeks
Able to start work in next 2 weeks
Available for at least 1 hour per week (part time included)

Question 16

How useful is the labour force survey?

Answer 16

Uk governments official measure
May over estimate unemployment due to workers seeking part time hours
Subject to sampling error

Question 17

What are the costs of unemployment for a business?

Answer 17

Lower output
Fall in demand for goods + services
Reduction in sales + profits
Demand of normal goods reduced
Demand of inferior goods increased

Question 18

What are the costs of unemployment for the government?

Answer 18

Greater costs in unemployment benefits
Fall in tax revenue (income tax + spending power reduced)
Increased borrowing
Fall in profits - less corporation tax

Question 19

What are the costs of unemployment for the economy?

Answer 19

Fall in GDP - economy shrinks
Lost output
Workers leave labour force permanently
Rising income inequality + relative poverty

Question 20

What are the social costs of unemployment?

Answer 20

Income lost
Falling living standards
Health risks (Stress, social exclusion)
Loss of marketable skills

Question 21

What does the loss of marketable skills entail?

Answer 21

Longer unemployment, lower chance of finding fresh employment
Unemployed become less attractive to employers

Question 22

What is structural unemployment?

Answer 22

Persistent, long term unemployment