Lesson 11 - Causes Of Unemployment Flashcards
What are the 4 main causes of unemployment?
Seasonal
Structural
Frictional
Cyclical
What is cyclical unemployment also referred to as?
Demand-deficient
What is seasonal unemployment?
Regular seasonal changes in employment
Due to changes in labour demand
(Tourism, agriculture, Christmas)
What is structural unemployment?
Changes to economy mean that skills do not match job opportunity
Which concept is linked to structural unemployment?
Labour immobility
What is labour immobility?
How difficult it is to transition from one job to another
What is frictional unemployment?
Transitional unemployment due to people moving between jobs
What is cyclical unemployment?
Fall/persistent weakness of aggregate demand
Leads do decline in GDP + jobs
What is the disputed 5th cause of unemployment?
Real wage unemployment
What does real wage unemployment entail?
Wages too high for supply + demand conditions
Minimum wage may be too high
Unions may have negotiated disproportionately high wages
What are the 2 ways in which unemployment is measured?
Claimant count
Labour force survey
How does the claimant count measure unemployment?
Records the number of people who claim Jobseekers Allowance
Can prove that they are seeking work
How useful is the claimant count?
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
How does the labour force survey measure unemployment?
Quarterly survey of roughly 40,000 households + 80,000 individuals
Which 3 conditions must apply to an individual in order to be classified as unemployed by the survey?
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)
How useful is the labour force survey?
Uk governments official measure
May over estimate unemployment due to workers seeking part time hours
Subject to sampling error
What are the costs of unemployment for a business?
Lower output
Fall in demand for goods + services
Reduction in sales + profits
Demand of normal goods reduced
Demand of inferior goods increased
What are the costs of unemployment for the government?
Greater costs in unemployment benefits
Fall in tax revenue (income tax + spending power reduced)
Increased borrowing
Fall in profits - less corporation tax
What are the costs of unemployment for the economy?
Fall in GDP - economy shrinks
Lost output
Workers leave labour force permanently
Rising income inequality + relative poverty
What are the social costs of unemployment?
Income lost
Falling living standards
Health risks (Stress, social exclusion)
Loss of marketable skills
What does the loss of marketable skills entail?
Longer unemployment, lower chance of finding fresh employment
Unemployed become less attractive to employers
What is structural unemployment?
Persistent, long term unemployment
