Unemployment Flashcards
What is unemployment
If a person is out of work, is willing and able to work and is actively seeking work and can work in the next 2 weeks
What are the ways of measuring unemployment
The claimant count
The Labour Force Survey
Why does the government record unemployment
To know how much spare capacity there is in the economy
To plan the budget and the amount of transfer payments to the unemployed
How can unemployment be undermeasured
The LFS is a sample of households and there is always the possibility of sampling error
What is under employment
When people want to work full time jobs but only have a part time job
This is not counted in unemployment
What is the advantage of the LFS
It is internationally used and can be compared to other countries
How can unemployment be over measured
People who work for cash but say they are unemployed
What is economically inactive
When people are not working and not seeking work
what are the costs of unemployment
Individual
Economic
Fiscal
Social
What is the individual cost of unemployment
Loss of income
Fall in living standards
Loss of self-esteem
What is the economic cost of unemployment
Productively inefficient economy
Opportunity cost
What is the fiscal cost of unemployment
Cost of transfer payments
Loss in tax revenue
Budget deficit
What is the social cost
social deprivation
Worsening health
Lower life expectancy
What is long term unemployment
Unemployed over 1 year
What are NEETs
16-24 year olds who are not employed, in education or training
What are the benefits to unemployment
Individual
Firm
Economy
What is the individual benefit of unemployment
People can change career and do new training
What are the benefits to a firm of unemployment
Cheaper and easier to find labour
Workers are more likely to work harder if they can be replaced easier
What are the benefits to the economy of unemployment
Can keep down demand pull ad cost push inflation
What are the types of unemployment
Cyclical
Structural
Seasonal
Frictional
Real wage
What is cyclical unemployment
It is unemployment caused by the trade cycle and lack of AD and lack of derived demand for labour
Known as the demand deficient or Keynesian unemployment
What is structural unemployment
It is unemployment that occurs when economies change their basic composition over time. Linked to what, how and where stuff is produced.
What recurring features does structural unemployment have
Regional unemployment - industries focused in certain areas
Technological unemployment - replaced by machines
Unemployment made worse by immobility of labour
What is geographical immobility
When a person is unwilling and unable to move to a different part of the country to take up new work
What is seasonal unemployment
Unemployment caused by changes in seasons that result in an impact on employment in seasonally affected industries
What is frictional unemployment
A form of short term, transitional unemployment due to workers moving between jobs
What makes frictional unemployment worse
Imperfect information about job vacancies
Disincentives from taxes and benefits system
What is real wage unemployment
It is the surplus of labour that exists in a market due to sticky wages that have not been adjusted following a change in demand or supply of labour
What causes sticky wages
Trade unions
State imposed minimum wages
Powerful employers who want to keep the employees motivated
What is the cure to cyclical unemployment
Boost AD
Cut in T
Increase G
Cut Interest rates
Increase money supply
Depreciate exchange rate
What is the cure for structural unemployment
Regional policy of moving jobs to low unemployment areas
Incentives to firms who set up in these areas
Subsidised housing
Retraining schemes if there is a lack of skills
How to cure frictional unemployment
Cut income tax
raise min wage
cut transfer payments
Remove information failure by creating systems that connect the unemployed and employers
How to cure real wage unemployment
Legilsation to weaken the power of workers
Weaken the dominace of large firms
