Unemployment

Question 1

The claimant count

Answer 1

The number of people who are claiming unemployment benefits
- only includes those who are actively seeking government benefits

Question 2

Underemployment

Answer 2

when a person is employed but there is a misallocation of skills and qualifications. Results in part-time work, low wages, or jobs below skill level

Question 3

Causes of unemployment

Answer 3

• structural unemployment: when there is a mismatch between the skills of the workforce and the requirements of available jobs e.g. technological unemployment. Worsened by geographical immobility
• frictional unemployment: temporary unemployment when individuals are between jobs or entering the workforce. Will never get 100% employment
• seasonal unemployment: seasonal variations in demand e.g. tourism, agriculture
• demand deficient/ cyclical: results from the business cycle. Arises from a lack of aggregate demand during economic downturns. Reduced consumer spending reduces profits so they may need to reduce their costs by making workers redundant. Can be caused by increases in productivity therefore fewer workers are needed to produce the same quantity of goods
• real wage inflexibility: when wages are too high, leading to job cuts. Classical economics would argue that getting rid of the NMW would cause unemployment to fall to 0. However cutting wages at a time of low consumer spending would lead to further falls in consumer spending.

Question 4

Effects of unemployment

Answer 4

• Consumers: less disposable income, standard of living may fall. Psychological consequences of losing a job as well
• Firms: larger supply of labour. This may cause wages to fall, which would help firms reduce their costs. However, with higher rates of unemployment, consumer spending falls so firms may lose their profits. Producers which sell inferior goods may see a rise in sales
• Workers: a waste of workers resources. They are unable to use their skills
• Society: negative externalities in the form of crime if unemployment rate increases
• The government_: The government may have to spending more on JSA. The government would also receive less revenue.