Macro 8 - Types, Causes, Measures And Costs Of Unemployment

Question 1

Basic costs of unemployment

Answer 1

1. Lowers productivity
2. Gov has to spend more in JSA (oc of what can’t spend on).
3. Lowers GDP
4. Lower tax revenue
5. Hysteresis

Question 2

LFS

Answer 2

Labour Force Survey surveys around 60,000 households.

Question 3

CC

Answer 3

> Claimant Count gives a lower rate of unemployment as people choose not to claim JSA and some aren’t entitled to it.

Question 4

ILO

Answer 4

> The International Labour Organisation defines unemployment as “out of work, actively sought employment in last 4 weeks and available to work in next 2 weeks”.

Question 5

Who are the 4 types of people that are recorded by the LFS but not the CC?

Answer 5

1. High-earning partner
2. Savings over certain threshold
3. People who still need to work but are over state pension age.
4. Under 18.

Question 6

Top tip for question

Answer 6

Can’t compare claimant Count or equivalent between countries as they may have different requirements.

Question 7

Types of unemployment

Answer 7

1. Cyclical
2. Seasonal
3. Frictional
4. Structural

Question 8

Cyclical unemployment

Answer 8

> Causee by falling AD during to the economic cycle.
To resolve: gov may reduce rate of income tax + increase the size of state pensions, reduce interest rates, increase wages.
Demand side.

Question 9

Seasonal unemployment

Answer 9

> Unemployment that occurs during times of the year when there’s less demand in a particular industry or region.
Resolve through diversification.
Supply and demand side.

Question 10

Frictional unemployment

Answer 10

> Unemployment for short periods as people move between jobs.
To resolve: e.g. improve job search websites so employers have more tailored lists of potential employees and their skills.
Search unemployment = Don’t take first job as want a different one.
Casual unemployment = irregular, builder
Supply side.

Question 11

Structural unemployment

Answer 11

> Occurs when the markets in which there’s a higher demand don’t match the skills of the workforce.
To resolve: subsidise training courses, encourage students to take more vocational courses in higher education.
Sector immobility.
Geographical immobility.
Technological immobility
International unemployment.
Supply side.

Question 12

Causing unemployment

Answer 12

> Unemployment can arise due to issues with demand (I.e. demand for goods has fallen) or due to supply (the workforce isn’t willing or able to meet the needs of employers or consumers in some way).

Question 13

Demand side unemployment

Answer 13

Cyclical and seasonal

Question 14

Supply side unemployment

Answer 14

Seasonal, frictional and structural

Question 15

Demand side - definition

Answer 15

Problems, factors or government policies that affect or attempt to influence AD of an economy.

Question 16

Supply side - definition

Answer 16

Problems, factors or government policies that affect or attempt to influence the ability of firms to supply goods and services.

Question 17

Geographical factor immobility - definition

Answer 17

When favroes of production can’t reach the firms who would use them due to the geographical or physical barriers.

Question 18

Occupational factor immobility definition

Answer 18

When factors of production currently involved in one sector or industry cannot efficiently be used in another industry where they are demanded.

Question 19

Factor immobility

Answer 19

> Factor immobility is where there are factors of production available but there are prohibitive barriers that prevent them reaching the firms that need them.
2 types: geographical and occupational.
Geographical: physical barriers, such as distance, geographical features or national borders, that prevent labour from relocating or commuting to work
Occupational: where the labour available is unable to move between sectors or industries usually due to a skills deficit.

Question 20

Costs of unemployment for others

Answer 20

1. Reduced demand for exports so others AD falls.

2. Immigration: shortage of labour in an ageing population.

Question 21

Benefits of unemployment for others

Answer 21

1. Time to search.

2. Easier