Unemployment Flashcards
What is full employment
When everyone who is willing and able to work is employed (3% unemployment roughly in UK)
Unemployment rate
The % of people in the labour force without a job but willing and able to work
What drives supply side unemployment
Geographical and occupational immobility, lack of incentives to work, real wage unemployment
What types of unemployment are demand side causes
Cyclical - unemployment driven by a period of negative economic growth
What are labour market rigidities
Factors which prevent forces of supply and demand operating within labour markets such as:
Minimum wage legislation
Labour union activities
Employment protection laws
Generous unemployment benefita
How do you find the NRU
Sum of structural, frictional, seasonal and casual unemployment
What is hysterisis
The deterioration of knowledge and skills due to long term unemployment
How can high unemployment be solved
Demand side - fiscal and monetary policy
Supply side - expenditure on things which will increase LRAS
What are the costs of unemployment
Debt, homelessness, crime
Can be long term due to hysterisis
Can be a cycle, as people have less income so consume less, AD decreases which can cause recession and cyclical unemployment
Bad for consumer confidence if they aren’t sure of keeping jobs
how is unemployment measured
- claimant count: number of people claiming unemployment benefits (JSA)
- using the Labour Force Survey: a sample of the UK population (40,000 households) are asked questions regarding their employment to capture employment data
unemployment rate definition
the % of people in the labour force without a job but registered as being willing and able to work
labour force definition
the people holding a job as well as those registered as being willing and able to work but currently without work
participation rate definition
the % of the population of working age declaring themselves to be in the labour force
pros and cons for claimant count measurement
difficult comparisons over time as government have often changed necessary criteria for JSA.
excludes a number of people who are unemployed but don’t claim JSA (not eligible or too proud).
may be difficult for individuals to prove that they are looking for work.
however,
cheaper and quicker
pros and cons for LFS measurement done by International Labour Organisation
could be subject to sampling errors and may not be truly representative.
takes a long time to collect data and is costly.
only calculated quarterly so often there’s a lag between true changes in the workforce and availability of this data.
however,
better for international comparisons as the ILO definition is used by many countries
