unemployment

Question 1

what is the traditional method to measure unemployment

Answer 1

claimant count: counts the number of people able to claim JSA or universal credit due to being unemployed

Question 2

what is the labour force survey (4)

Answer 2

• samples aprox 60,000 people each month an counts the amount of people who are unemployed and:
• are available to start work in the next two weeks and actively sought work in the last 4 weeks or had found a job and were waiting to start
• the number from LFS are higher than the claimant count but seen as more accurate and can be sued to make international comparisons
• not all working age people are counted as some are classed as economically inactive meaning they do not work but also do not satisfy all the criteria of the LFS

Question 3

advantages of the labour force survey (2)

Answer 3

• results are considered to be more accurate
• good for international comparisons

Question 4

disadvantages of the labour force survey (3)

Answer 4

• subject to sampling errors
• not fully representative
• can be difficult to decide whether someone is sick of actively seeking work

Question 5

issues with the claimant count (4)

Answer 5

• many exclusions to benefits so many will be unable to claim so they are missed
• frequent changes in the criteria for claiming benefits makes it hard to make long term comparisons
• some unemployed do not register with JSA so not included
• some work in the black economy but fraudulently claim benefits

Question 6

Definition of unemployment

Answer 6

any factor of production which exists but is not engaged in the productive process is unemployed

Question 7

Definition of full employment

Answer 7

when all who are able and willing to work are employed this does not mean zero unemployment

occurs when around 2-3% of the population is unemployed and is referred to as the natural rate of unemployment

Question 8

what is cyclical unemployment

Answer 8

Associated with recession when total demand has fallen leading to high unemployment

Question 9

what is structural unemployment

Answer 9

caused by a mismatch between the skills that workers can offer and the skills demanded of workers by employers e.g. skills gap

linked to the closure of entire industries where workers are unable to transfer to other business

Question 10

what is frictional unemployment

Answer 10

occurs when people are switching between jobs either because they have been made redundant or are looking for a new job also links to lack of knowledge of job opportunities or occupational/geographical immobility

Question 11

what is seasonal unemployment

Answer 11

occurs in industries such as agriculture, tourism and building where employment fluctuates with seasons

Question 12

effects of unemployment on individuals (5)

Answer 12

reduces income while major spending commitments continue e.g. mortgage = fall in living standards

reduced efficiency as unemployed workers lose skills, fitness and motivation

reduces status leading to social exclusion from friends

increased physical and mental health problems e.g. stress and poor diet

increased social deprivation leading to negative externalities

Question 13

effects of unemployment to firms (7)

Answer 13

• consumers have less income so there is a fall in demand for products leading to lower sales and profits
• suppliers also lose customer and suffer falls in sales and profits
• downward multiplier effect
• redundancies wastes resources invested in training and educating workers
• bigger poll of surplus labour available = more choice when recruiting
• not a high pressure to pay high wages
• less risk of industrial action due to fear of job loss leading to reduced trade union power

Question 14

effects of unemployment on the government (7)

Answer 14

• reduced tax revenue for the government as less income tax is being received
• increased burden on taxpayers as they need to fund training for unemployed people
• increased spending on JSA which increases budget deficit
• increased burden on NHS to deal with health issues linked to unemployment
• increased crime level and cost of policing
• increased civil unrest
• rise in government borrowing

Question 15

effects of unemployment on the economy (5)

Answer 15

• increased civil unrest and crime
• fall in economic growth due to reduced AD
• increase in inequality so rise in poverty
• some unemployed may leave the labour force permanently - fall in potential GDP
• lost output from people being out of work

Question 16

fiscal policy to reduce unemployment (3)

Answer 16

cutting tax: when tax on consumers are reduced it should help increase disposable income which increases demand for products, helping growth and increase employment.

when corporation tax is reduced business retain more profits which can be invested into expanding and creating more jobs

increase gov spending should increase job creation in public sector and give existing workers more income. this increases demand for products, helping growth and leading to more workers being employed

Question 17

monetary policies to reduce unemployment (2)

Answer 17

• lower interest rates makes borrowing cheaper which encourages spending thus demand which creates growth for jobs and reduces unemployment
• low interest rates make it cheaper for business to borrow money which they can use to grow which requires more staff

Question 18

supply side policies to reduce unemployment (5)

Answer 18

• aim to improve total demand by increasing workers skills
• provide high quality education and training giving workers new skills to find jobs and help occupational immobility which occurs when people lack skills to do various jobs
• give employment subsidies e.g. financial incentives to employ those on long term unemployment
• have stricter benefit system to make it less financially worthwhile foe people to claim benefits
• improve geographical immobility to encourage workers to move to different locations to gain employment

Question 19

how to improve geographical immobility (4)

Answer 19

• provide affordable housing
• give financial help with relocation costs
• improve transport infrastructure to make travel easier and quicker
• ensure adequate provision of social services e.g. doctors