Unemployment Flashcards
Define unemployment
Unemployment refers to the total number of people who are not working but looking for a job
What are the two main measurements of unemployment
- claimant count
- labour force survey
Define claimant count
The total amount of people not working but receiving benefits from the government
Define labour force survey
Represents everyone who is unemployed and who are actively seeking work over the last 4 weeks even if they are not entitled to benefits (can include students pensioners etc)
Name the Effects of unemployment [3]
- expensive for the government as they pay for benefits and taxes aren’t being payed meaning there is an opportunity cost
- if the unemployed were working they would be producing more and closer to the PPF; making ppl better off
- number of negative social costs for the economy which is often payed by the gov E.g. high levels of unemployment tends to lead to poverty
What are the causes of unemployment ? [7]
- Lack of spending in the economy
- Frictional unemployment
- Structural unemployment
- Technological unemployment
- Classical unemployment
- Seasonal unemployment
- Voluntary unemployment
What’s frictional unemployment
When ppl are unemployed either because they are in between jobs or because their looking for they first job (often short term unemployment).
What is structural unemployment?
Occurs when a particular industry goes into decline usually due to shortages of resources (E.g. coal); or competing countries are producing products cheaper.
What is technological unemployment?
When employees loose their jobs due to technology improvements; meaning the industry might not be in decline but they simply don’t need many ppl (E.g. car industry)
What is classical unemployment?
When unemployment is caused due to wages being too high meaning firms can’t afford to employ as many people. Often due to :
- Government for setting minimum wage
- Trade unions for pushing up wages and threatening strike
What is seasonal unemployment?
Where workers are only needed at certain times of the year E.g. Christmas
What is voluntary unemployment?
People who don’t want to work and would rather live on benefits
What are 6 of the causes of unemployment
Often known as Supply side causes due to no spending in the economy:
Seasonal Structural Classical (Frictional) Geographical Real wage equilibrium
What is one method to deal with demand-based unemployment?
Keynesian economists believe governments should use their fiscal and monetary policies to increase spending in the economy, putting AD closer to FE. For example, reducing taxation.
In addition to this, spending should have a multiplier effect.
What is the multiplier effect?
The multiplier effect is when the money invested by a government into the economy has a larger effect than the initial investment. For example, When the government invests in a large infrastructure project, the money payed to the people employed to work increases the number of people with a larger discretionary income, increasing consumer spending, therefore increasing AD even further.
