Unemployment Flashcards
Define unemployment?
Where an individual does not have a job and is willing and able to work.
what are the two ways of measuring unemplyoment?
- The claimant count
- The Labour Force Survey
What is the claimant count?
It is the number of people who receive unemployment benefits
What is the problem with the Claimant Count?
The claimant count underestimates the number of unemployed because:
- Not all unemployed qualify for JSA
- Not all unemployed claim JSA
What is the Labour Force Survey?
It takes a sample of 60,000 households and provides a total unemployment figure
What is criteria for being unemployed according to the Labour Force Survey?
- You don’t have a job
- You have been looking for a job for at least 4 weeks
- If you get a job you could start within at least 2 weeks.
What are some effects of unemployment on Households and Individuals?
No income:
- no way of paying debt
- Have to rely on others
- potential loss of home
- Unemployment can lead to health problems like depression and alcoholism.
- Lack of self-respect and identity
What are some effects of unemployment on The economy?
- Less ouput, less money in circulation (affects the government objective)
- Lower demand
- Fewer wage rises
What are some effects of unemployment on the government?
- Rise in benefit spending (opportunity cost)
- Fall in government revenue
What are some effects of unemployment on communities?
- Loss of facilities and amenities
- rise in crime
What are some effects of unemployment on firms?
- Less pressure on pay rises
- (depending on product) fall in trade
- recruitment is easier
Define unemployment rate?
the number of people unemployed as a percentage of the number of people who are economically active
What are problems with the Labour Force Survey?
The labour force survey is very time-consuming and expensive measure compared to the claimant count
Define cyclical or demand-deficient unemployment?
unemployment caused by a lack of aggregate demand in the economy in accordance with changes in the economic cycle
Who is seen as economically inactive?
- full time students
- homemakers
- the ill, disabled, unqualified
- not in employment, education or training
What are the conditions for employment under the Labour Force Survey
- you don’t have a job
- you have been looking for a job for at least 4 weeks
- if you get a job, you could start work in at least 2 weeks
What are some basic causes of unemployment?
- firm goes bust
- mechanisation
- lower wages in other countries
- mismatch of population/jobs in specific areas
- weak economy
What are some more detailed causes of unemployment?
- Demand-deficient or cyclical unemployment
- Structural unemployment
- Disequilibrium unemployment
- Frictional unemployment
- technological unemployment
Explain demand-deficient or cyclical unemployment?
- A fall in output, so less demand for labour.
- Aggregate demand falls, so not as much labour is needed
Define structural unemployment?
Unemployment caused by changes into he pattern of global supply and demand that mean that labour in a particular industry is no longer required
Define Frictional unemployment?
Short-term unemployment that occurs when workers are between jobs
Define technological unemployment?
Unemployment caused by capital replacing labour in a particular industry or occupation
Define disequilibrium unemployment?
A situation where wages rise without any changes in supply or demand
What can disequilibrium unemployment be caused by?
- Industrial action (forcing wages up)
- A rise in minimum wage
Explain disequilibrium unemployment?
- If wages go up then demand for employment will fall.
- However the supply for employment will rise and this extra group of people, now willing and able to work will not be employed.
- The diagram says that if wages go up, then unemployment will also go up.
HOWEVER… problem with disequilibrium unemployment?
- It is a two dimensional diagram that is telling us that unemployment is only to do with increase or decrease in wages
- There are other factors which affects unemployment like demand for goods and services.
- The diagram, in practice, is useless
What does economic analysis of causes of losing a job, not care about?
Losing a job through:
- incompetence
- laziness
- bad behaviour
What is hysteresis?
- A prolonged period of unemployment may reduce future employability.
- They may lose skills
- They get into a habit of being unemployed
