Unemployment

Question 1

Unemployment

Answer 1

People able, available and willing to work at the going wage rate but cannot find a job despite an active search for work and are able to start within 2 weeks

Question 2

Level of Unemployment

Answer 2

The number of people who are unemployed

Question 3

Rate of unemployment

Answer 3

The % of the labour force that are unemployed

Question 4

Rate of unemployment equation

Answer 4

Unemployment
————————- x 100
Labour force

Question 5

Labour force

Answer 5

Includes people who are economically active. People who are willing and able to work.

Question 6

Economically inactivity

Answer 6

Neither in employment or unemployment

Question 7

Reasons for economic inactivity (5)

Answer 7

Student
Looking after family
Long-term or temporarily sickness
Retired
Discouraged worker

Question 8

Claimant count

Answer 8

The number of people claiming job seekers allowance or universal credit

Question 9

Labour force survey

Answer 9

A quarterly survey of 60k households complied by the ONS studying the employment circumstances of the UK population

Question 10

Problems of the claimant count (4)

Answer 10

• Not everyone who is eligible signs on
• Some temporarily unemployed don’t claim
• Changing criteria for UC
• Some have jobs in the black economy and still claim

Question 11

Advantages of the Labour force survey (2)

Answer 11

Recognised as the most reliable
Picks up trends in service

Question 12

Labour force survey disadvantages (2)

Answer 12

Costly to compile
Subject to sampling errors

Question 13

Underemployment

Answer 13

When individuals work but they want to work more often

Question 14

Unemployment: negative consequences for the Economy (3)

Answer 14

• Lost output
• Lack of demand
• Hysteresis: high unemployment leads to higher unemployment because people have less disposable income

Question 15

Unemployment: consequences for Business (3)

Answer 15

Reduced demand and profits
Less incentive to invest
Reduced motivation for workers

Question 16

Unemployment: consequences for the Unemployed (3)

Answer 16

Lower living standards
Reduced chances of finding work
Lose skills they once had (de-skilling)

Question 17

Unemployment: consequences for the Government (2)

Answer 17

Lower tax revenue
Increases spending on benefits

Question 18

Benefits of unemployment (3)

Answer 18

• Reduced risks of inflation
• Bigger pool if workers for businesses
• Rise in Entrepreneurship and self employment

Question 19

Types of Unemployment (5)

Answer 19

Frictional
Seasonal
Structural
Real wage
Cyclical

Question 20

Seasonal unemployment

Answer 20

When people are unemployed at different times in the year when their is lack of demand within that industry

Question 21

Examples of seasonal unemployment (2)

Answer 21

Tourism
Farming

Question 22

Structural unemployment

Answer 22

Caused by a mismatch between the skills people have and the jobs that are available (industry decline) or when workers get replaced by machinery

Question 23

Frictional unemployment

Answer 23

When people are temporarily unemployed due to movement between jobs or someone who has recently graduated

Question 24

Cyclical unemployment

Answer 24

• Is involuntary and due to a lack of demand
• During a recession we see a rise in unemployment because of failing businesses
• Other firms may try to cut costs to survive or maintain profits this is know as Labour shedding or down-sizing

Question 25

Policies to incentive businesses to employ (3)

Answer 25

• Macro stimulus (boost AD) (+ Multiplier effect)
• Reduce the cost of employment
• Competitive policies e.g. reduce corporation tax and create incentives for new businesses

Question 26

Policies to incentives the unemployed to find work (3)

Answer 26

• Reduced occupational immobility: an expansion of apprenticeships
• Improved geographical immobility: better public transport
• Stronger work incentives: higher wage and cut benefits

Question 27

Most important thing to consider when trying to reduce unemployment

Answer 27

Is making sure that the policy focuses on the type of unemployment

Question 28

Voluntary unemployment

Answer 28

Workers choose not to work at the current equilibrium wage rate

Question 29

Reasons for voluntary unemployment (3)

Answer 29

• Overly generous welfare benefits
• High rate of taxes
• Workers seeking better employment conditions

Question 30

Involuntary unemployment

Answer 30

Workers are prepared to accept the existing wage rate but are unable to find a job

Question 31

Reason for involuntary unemployment

Answer 31

A lack of AD

Question 32

Real wage unemployment

Answer 32

When wages are above the equilibrium level causing the supply of Labour to be greater than the demand

Question 33

Reasons for real wage unemployment (2)

Answer 33

• Trade unions
• National minimum wage