Unemployment

Question 1

What is unemployment?

Answer 1

When someone of working age is out of work and actively seeking work

Question 2

What is employment?

Answer 2

Working age people who are either working for firms or other organisations, or are self employed

Question 3

What is labour force?

Answer 3

Amount of people who are employed and unemployment and are economically active

Question 4

What is the Claimant count?

Answer 4

A measure of unemployment that is calculated by totalling the amount of people receiving unemployment related benefits eg. Number of people on job seekers allowance.

Question 5

What is underemployment?

Answer 5

Occurs when an individual is employed in a second choice occupation or is working part time despite the fact that they would like to work full time

Question 6

What is the International Labour organisation ( ILO) and what is the ILO unemployment rate?

Answer 6

A member organisation of the UN that collects statistics on the labour market conditions and seeks to improve working conditions.

ILO unemployment rate- measure of the percentage of the labour force who are without jobs, but are available to work, willing to work and looking for work

Question 7

What is Labour Force Survey?

Answer 7

Measure of unemployment based on a survey using the ILO definition of unemployment

Question 8

What are the Limitations of the ILO?

Answer 8

1. The ILO asks 80,000 households whether anyone has been out of work for 4 weeks and whether they are ready to start work in the next 2 weeks. HOWEVER there are 27m households so NOT AN ACCURATE ESTIMATE OF UNEMPLOYMENT ACROSS THE UK SO ILO IS LIMITED.

CAN LACK ACCURACY.

Question 9

What are the limitations of the Claimant Count?

Answer 9

1. Not everyone who is unemployed will claim benefits. Stigma around claiming benefits.

Means it will underestimate unemployment as there are people who should be counted as unemployed but are not included in this measure.

Question 10

What is Frictional Unemployment?

Answer 10

Unemployment that occurs when someone is between jobs

Question 11

What is cyclical or demand deficient unemployment?

Answer 11

Unemployment that arises during the slowdown or recession phases of the economic cycle.

Question 12

What is structural unemployment?

Answer 12

Where industries are in decline and workers skills are becoming obsolete

Question 13

What is seasonal unemployment

Answer 13

When people are out of work for some periods of the year.

Question 14

What is classical or real wage inflexibility

Answer 14

Where there are problems with the supply side of labour eg. The minimum wage is is too high and set above the equilibrium wage.

Question 15

What is the significance of an increase in the employment rate?

Answer 15

Increased GDP- higher employment, output in economy increases

Increased revenue, profits, incomes- higher standards f living

Higher government taxation

Question 16

What is the significance of a decrease in the unemployment rate?

Answer 16

Falling government spending on out of work benefits

Increased employment which can mean that people who are out of the job market for a long time becoming increasingly unemployable

The job market becoming less flexible with fewer workers for employers to choose from

Question 17

What is the significance of changes in the activity rate

Answer 17

Increase in inactivity rate:

Productive capacity of the country will fall

There may be more claims on state benefits

HOWEVER IF INCREASE IN INACTIVIRY RATE IS DUE TO PEOPLE IN HIGHER EDUCATION MEANS INCREASE IN SKILLS OF THE FUTURE WORKFORCE

Question 18

What are the costs of unemployment?

Answer 18

INCREASED SPENDING ON BENEFITS-
unemployment rises, government has to spend more on unemployment related benefits. Reduces spending on other essential services such as education and health or will have to raise its borrowing or tax rates. This means money spent on benefits will have opportunity cost.

LOST TAX REVENUE- more people in work, incomes, spending and profits will be higher. This means government would collect more tax revenue from all forms of taxes and this revenue could be spent on education, health and transport which improves quality of peoples lives and increase country’s productive capacity

HYSTERISIS- The longer people are out of work, the more difficult it is for them to get employed, which, if long term enough, can reduce the productive capacity of the economy. Employers are less reluctant to hire someone who has been out of work for a long time because:
1. Being out of a job that long may suggest that they are not good workers
2. The longer someone is unemployed, the more their skills deteriorate and the more out of
touch they become with advances in working methods and technolog

On the supply side, the long term unemployed tend to seek work less actively over time because:
1. They may lose their work ethic and get used to being at home
2. They may become discouraged by the continuous rejections

Question 19

What are the benefits of unemployment?

Answer 19

Firms benefit from greater choice- more unemployment, more choice of good workers to choose from, good for long term profitability

Workers have time to search for the best job

Question 20

What is the significance of migration for employment and unemployment?

Answer 20

Migration is movement of people from one country to another.

If immigrants come to a country to fill vacancies then immigration leads to an increase in employment

However if immigrants are looking for work and either dont find it or displace other people from work then employment may not change and unemployment might increase

If immigrants come to a country to earn money to send home to their families this affects current account of balance of payments in short run.