Macro- Unemployment Flashcards
Conditions to be described as unemployed
- of working age
- willing and able to work
- actively seeking job
- being wo a job
How is unemployment measured
Labour force survey
Claimant count
Describe labour force survey
Survey that questions households to workout the number of employed, unemployed and economically inactive to workout the unemployment rate
Unemployment rate equation
Unemployed/ economically active (employed and unemployed) X100
Describe claimant count
Amount of people claiming unemployment benefits
Disadv of claimant count process
- hard to compare to other countries as some don’t have benefits system
- not everyone will claim benefits
- not everyone can claim benefits
= spouse whose employed means you don’t get claims - could be subject to fraud
= using it as an excuse for money for gov
Disadv of LFS
- sample size errors or +-3%
- small sample sizes due to expense of LFS
- discouraged workers wont seek work but still not seen as unemployed
- inactive groups like carers
- under employed eg part time workers
= only need to work an hour a week to be employed - disparities like age and gender related etc not taken into account
Define seasonal unemployment
Seasonal workers might be without paid jobs due to the time of year when there are seasonal changes in demand, production and employment
Eg farming, tourism and tuition services
Describe frictional unemployment
caused by workers seeking a better job or who are between jobs
- also affects people who are new entrants to the labour market like school leavers and uni graduates
- affects people who are on short-term employment contracts
Reasons for high level of job vacancies in UK economy
- Brexit made it harder to recruit workers from the EU
= causing shortages of workers in sectors, like hospitality, social care and construction - Skills shortages like engineering and IT allied to relatively low pay in some industries
= causing problems of recruitment & retention
Describe structural unemployment
- Unemployment caused by lack of suitable skills for jobs available= result of de-industrialisation or other structural changes in an economy
- people stay unemployed because of disincentive effects from the tax & welfare system.
Causes of structural unemployment
- new jobs need new skills
= cost of re-training - unaffordable housing
- erosion of skills from long term unemployment
- effect of welfare system on work incentives
Describe cyclical unemployment
-it’s involuntary unemployment due to lack of aggregate demand for goods
= also known as Keynesian unemployment
Describe real wage unemployment
- occurs when wages are above the equilibrium wage due to lower demand for workers
Eg high minimum wages or powerful trade unions bargaining for wages above the equilibrium
= can lead to a fall in aggregate demand
Describe voluntary unemployment
- occurs when individuals choose not to work for various reasons, even though suitable job opportunities are available to them
Reasons: People may be voluntarily unemployed for a range of personal reasons
= eg taking a break to pursue education, raising children, pursuing early retirement, or taking time off for travel
Describe involuntary unemployment
- occurs when individuals want to work and are actively seeking employment but are unable to find suitable job opportunities
- Reasons: Involuntary unemployment is typically the result of external factors beyond an individual’s control eg recession, job market conditions, lack of available jobs in a specific industry, or job loss due to company closures
Describe nature of unemployment
The natural rate of unemployment represents the level of unemployment that exists in an economy when it is operating at full potential or in a state of long-term equilibrium
Demand side- how gov can decrease unemployment
- Governments can increase spending (e.g. on infrastructure)
- Cut direct taxes= increase aggregate demand by stimulating economic growth
Monetary policy: - Central banks can lower interest rates = encourage consumers to spend more & save less, businesses to invest more = would boost aggregate demand & employment
- Lower interest rates= lead to a currency depreciation = lead to increased exports & boost aggregate demand
Supply side- how gov can dear ease unemployment
- Gov can invest in education & training= improve skills of workforce= increase their productivity & improve occupational mobility
- Gov can encourage affordable housing rents & increase house building projects
- Reduce unemployment benefits & increase income tax free allowance= make it more attractive to be in work rather than receive benefits
Causes of geographical immobility in the UK labour market
- Housing costs: Rents are high in many towns and cities often taking up a high percentage of disposable income
- Other living costs: cost of living varies from one area to another= includes costs of commuting, childcare expenses & food prices. A study by the Institute for Fiscal Studies found that the cost of moving to a new area can be up to £10,000
- Family and social ties: Workers may be reluctant to move away from families and friends. A study by the Joseph Rowntree Foundation found that only 1 in 5 unemployed people is willing to move to find a job
Policies to improve geographical mobility in the UK labour market
- Rent controls to rental sector = improve rights of tenants including ban on no-fault evictions
- Increases in new house building with legal requirements for constructing affordable homes
- Infrastructure investment to expand the transport network + possible caps on fares
Policies to help reduce long-term unemployment in the UK economy
- Encouraging employers to hire long-term unemployed people= can be done by providing incentives like reduced national insurance contributions for employers
- Investing in skills training= can help people to develop new skills that they need to get a job like training in coding financial support for job search
Adv of unemployment for economy
- firms benefit from greater choice of employees
- workers have time to choose best job for them to increase productivity and happiness
Costs of unemployment for economy
- lost output as each workers potential and productivity is lost
- deterioration of gov finances= increase gov spending on unemployment benefits, decrease tax revenue= decrease income tax and increase gov spending in areas of unemployment
- hysteresis= unemployment in LR where ppl get discouraged as not hired due to loss of skills, more competition= lead to drop out of labour force= wasted potential
- less trade in other countries
- socials costs like increase crime rate
Costs of unemployment to individual
- loss of income
- loss of status and self worth
= lead to depression and potential suicide
