Topic : 9 Unemployment

Question 1

Labor force

Answer 1

People who are either working or seeking work

Question 2

Participation rate and state changes

Answer 2

Participation rate - Proportion of working-age population that is in the labor force ( trended upwards over time)
- Female participation rates have increased due to
changing social attitudes
- Male participation rates have fallen due to higher
education retention rates and changing social
attitudes

Question 3

Unemployment

Answer 3

Unemployment occurs when people who are willing and able to work or can’t find a job

Question 4

Unemployment rates

Answer 4

The proportion of the labor force who are willing and able to work but have not been employed in paid work for at least one hour in the survey week

Question 5

Full employment

Answer 5

People who want a job can find one without having to search for too long

Question 6

NAIRU

Answer 6

The NAIRU is the lowest unemployment rate that can be sustained without causing wage growth and inflation to rise

Question 7

Underemployment

Answer 7

Underemployment are part-time workers who indicate they prefer to work more hours

Question 8

Participation rate calculations

Answer 8

(labor force / working age population) x 100

Question 9

Underemployment rate calculations

Answer 9

(number of part – time workers seeking more work / labour force) x100

Question 10

Unemployment rate calculation

Answer 10

(number of people who are unemployed / labor force) x 100

Question 11

Underutilisation rate calculation

Answer 11

unemployment rate + underemployment rate

Question 12

Voluntary unemployment

Answer 12

When a worker decides to leave a job to search for another position

Question 13

Involuntary unemployment

Answer 13

When a worker is laid off from their place of work (when there is not enough demand for their services or other reasons such as business restructuring)

Question 14

Frictional unemployment

Answer 14

Occurs when workers are transitioning between jobs and have a temporary period of unemployment.voluntary
Short duration - a short-term form of joblessness when a worker is between jobs

Question 15

Cyclical unemployment

Answer 15

Occurs in periods of recession and trough, when there is a slowdown of economic activity. Demand-deficient unemployment, rises, when there is insufficient demand to employ the country’s resources fully and falls in periods of economic expansion.

Question 16

Structural Unemployment

Answer 16

Occurs when there is a mismatch of available and required skills in a sector of the economy eg. assembly line workers

Temporary - This can be long, especially for older workers or those with less education, overtime the demand generation effects of new tech tend to outweigh the displacement effects

Question 17

The natural rate of unemployment

Answer 17

The minimum level of unemployment that can be achieved given the current characteristics of the labour market
- varies over time- recently 4%
- People constantly moving and changing jobs
- Necessary component of a healthy economy

Question 18

Why can we never have 0% unemployment

Answer 18

0 unemployment means that every single person who wants to work has a job which is not possible in a dynamic economy. It is not possible as it means there is no room for workers to move to better jobs and no incentive for employers to improve their job offerings

Question 19

GDP Gap

Answer 19

GDP gap indicates that unemployment imposes a direct cost on the economy

Question 20

Effect of unemployment 1: Direct cost

Answer 20

Loss of income for the unemployed individuals, loss of tax revenue for the government, and the cost of providing unemployment benefits

Question 21

Effect of unemployment 2: Welfare payment

Answer 21

Welfare payments come from the taxpayer’s pocket - welfare payments associated with unemployment including unemployment benefits, food samples, job-seeker

Question 22

Effect of unemployment 3: Opportunity cost

Answer 22

The opportunity cost of unemployment and the loss of economic output as the skills and labour of the unemployed individual are not being utilized to produce goods and services

Question 23

Countercyclical

Answer 23

It moves counter to the business cycle as economic growth increases, cyclical unemployment falls

Question 24

Pro-cyclical (Inflation)

Answer 24

It moves with the business cycle and increases as economic activity rises

Question 25

Trends

Answer 25

Covid
Russia/ Ukraine war