Unemployment Flashcards
Define unemployment.
Unemployment can be defined as when people of working age, who are willing and able to work, cannot find a paying job.
What are the different types of unemployment?
- Frictional unemployment
- Real wage unemployment
- Seasonal unemployment
- Cyclical unemployment
- Structural unemployment
What is frictional unemployment?
Frictional unemployment is associated with people in the process of changing jobs. Even at full employment, the unemployment rate can never be 0 due to financial unemployment.
As jobs become more differentiated and specialised, matching skills with jobs will become more time consuming. This supply-side unemployment in small amounts is healthy as people can search for a job which is most suitable for them - thus making them more productive at work.
Even id there are matching job vacancies, due to imperfect information in the labour market, frictional unemployment will be created. Thus to counter this, perfect information can be created through JobsPlus and through media.
What is structural unemployment?
Structural unemployment is more long term as it is a form of equilibrium unemployment that arises from pattern changes in demand or supply in the economy.
It is split into regional and technological unemployment.
Regional unemployment arises when a declining industry is concentrated in a particular region of the country (ex. The south of Italy). Technological unemployment arises from the introduction of new technologies, so jobs might become more obsolete, and whole industries can decline.
To counter this, we need better education, for example,e better training from Jobsplus. As education and training will improve occupational mobility.
More so, regional policy is implemented by the EU by giving fund to smaller European countries who have high unemployment rates. The European Regional Development Fund (ERDF) aims to strengthen economic, social and territorial unity in the EU by correctly imbalances between its regions.
What is seasonal unemployment?
Seasonal unemployment occurs due to the seasonal nature of certain industries. The demand for goods and services will fluctuate with the seasons of the year, so will the derived demand for labour. People will be employed during peak seasons, only to be laid off or under-employed during low seasons.
Policies to reduce this include training and educational to increase mobility. More so, diversification is needed in order to remove specialisation.
What does the Philips Curve show?
It shows the relationship between unemployment and the rate of change of money wage rates in the UK.
It highlight the negative relationship between inflation rate and unemployment rate. However, Friedman and Phelps argued that this only makes sense in the short-run.
Inflation and unemployment in the SHORT-RUN, have an inverse relationship.
Can inflation rate and unemployment rate decrease simultaneously?
No they cannot, but they can increase simultaneously.
What is it called when inflation and unemployment rate increase at the same time?
Stagflation.
For example, in 1973, due to oil prices being extremely high, they were experiencing a period of stagflation - a period of high unemployment and high inflation.
