unemployment

Question 1

unemployment

Answer 1

those who are 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 the next two weeks

Question 2

level of unemployment

Answer 2

the number of people who are unemployed

Question 3

rate of unemployment

Answer 3

the number of people unemployed as a % of the labour force

Question 4

the labour force

Answer 4

those who are economically inactive ie. willing and able to work

Question 5

economically inactive

Answer 5

those who are neither in employment or unemployment
eg. students, homemakers, long-term sick, disabled, retired

Question 6

claimant count

Answer 6

the number of people using job seekers allowance/ universal credit

Question 7

labour force survey (ILO)

Answer 7

quarterly survey of approximately 60,000 households compiled by the office of national statistics studying the unemployment circumstances of the uk

Question 8

problems with claimant count

Answer 8

-not everyone eligible signs on
-temporarily unemployed tend to not claim
-changing criteria for universal credit
-jobs in black economy but continue to claim benefits

Question 9

pros of the labour force survey

Answer 9

-internationally recognised
-picks up trends in sectors
-more accurate than the claimant count

Question 10

cons of labour force survey

Answer 10

-costly to compile
-subject to sampling and extrapolation errors

Question 11

underemployment

Answer 11

occurs when people are counted as looking for an additional job, wanting longer hours or or being overqualified for their current job

Question 12

consequences of unemployment on the economy

Answer 12

-lost output (inefficient use of labour resources)
-lack of demand (possible negative multiplier effect and deflation- SRPC)
-hysteresis (high ue leading to even higher levels of ue)

Question 13

consequences of unemployment for businesses

Answer 13

-reduced demand for goods/services
-reduced profitability
-less incentive to invest
-reduced morale/concern over future job losses

Question 14

consequences of unemployment for the individual

Answer 14

-lower living standards
-social costs eg depression
-financial costs eg increased utility bill
-de skilling
-reduced chances of finding work due to larger pool of competition

Question 15

consequences of unemployment for the government

Answer 15

-lower tax revenue
-increased spending on social security

Question 16

bernie fits of unemployment

Answer 16

-reduced risk of inflation
-larger pool of unemployed labour available for growing businesses
-rise in self employment startups as an alternative to being unemployed

Question 17

types of unemployment

Answer 17

-seasonal unemployment
-frictional unemployment
-cyclical unemployment
-structural unemployment
-real wage unemployment

Question 18

seasonal unemployment

Answer 18

occurs when people are unemployed at certain times of the year, because they work in industries where they are not needed all year round

Question 19

frictional unemployment

Answer 19

(aka transitional unemployment) when people move between jobs, and includes joining the labour force for the first time

Question 20

cyclical unemployment

Answer 20

(aka keynesian unemployment) involuntary unemployment due to lack of demand for all goods and services

Question 21

structural unemployment

Answer 21

occurs when there is a mismatch between the skills people have and the jobs that are available, often due to long term decline in demand in an industry (replaced by robotics, caused by foreign competition)

Question 22

real wage unemployment

Answer 22

(aka classical unemployment) occurs when the wage rate is driven above market equilibrium

Question 23

real wage unemployment

Answer 23

(aka classical unemployment) occurs when the wage rate is driven above market equilibrium

Question 24

real wage unemployment

Answer 24

(aka classical unemployment) occurs when the wage rate is driven above market equilibrium

Question 25

policies to reduce unemployment-labour demand

Answer 25

-macro stimulus policies (low interest rates, depreciation in exchange rates, infrastructure investment)
-cutting the cost of employing workers (reduction in national insurance, financial support for apprenticeship/internship programmes)
-competitiveness policies (reduced corporation tax, tax incentives for innovation, enterprise policies)

Question 26

voluntary unemployment

Answer 26

a situation when workers choose not to work at the current equilibrium wage rate, eg due to excessively generous welfare benefits, high rates of income tax, seeking better work conditions (advocated by classical economists)

Question 27

involuntary unemployment

Answer 27

exists because there is a lack of aggregate demand ie. people are unable to work because there are insufficient jobs available, despite being prepared to accept the existing wage rate (advocated by keynesian economists)

Question 28

natural rate of unemployment

Answer 28

the equilibrium rate of unemployment ie. the rate of UE where real wages have found their free market level and where the AS of labour is in balance with the AD of labour

Question 29

gig economy

Answer 29

a labour market characterised by the prevalence of short-term contracts or freelance work as opposed to permanent jobs

Question 30

stagflation

Answer 30

when an economy experiences both high inflation and high unemployment at the same time

Question 31

movements along short run phillips curve

Answer 31

changes in aggregate demand

Question 32

shifts in short run phillips curve

Answer 32

changes in short run aggregate supply (changes in costa of production)

Question 33

the non-accelerating inflation rate of unemployment (NAIRU)

Answer 33

an extension of the concept of the natural rate of unemployment/full employment