Unemployment Flashcards
What is unemployment
Those without a job, who are looking for work and prepared to accept a job at the current wage rate
Which people are excluded from the labour force
Those who are unable to work and those who are in full time education, the labour force includes the unemployed
Which people are part of the claimant count
Those eligible to receive job seekers allowance
What are the 3 questions asked in the LFS survey
- Have you got a job
- Have you looked for a job in the last 4 weeks
- Are you available to start work in the next 2 weeks
What are the 3 types of unemployment
Cyclical
Structural
Frictional
What is cyclical unemployment
Caused by a lack of AD in the economy
When is cyclical unemployment typical
It is a feature of a recession and is associated with a negative output gap
How can cyclical unemployment be solved
By increasing AD in the economy (e.g. decrease interest rates)
What is structural unemployment
Occurs due to the changing nature of a dynamic economy
Certain industries decline and new industries start up
The UK has been through a period of deindustrialisation causing a lot of structural unemployment
What are the two reasons why a decline in certain industries creates structural unemployment
Geographical immobility
Occupational immobility
Give two examples of geographical immobility
- House prices being too high where jobs are available
- Family/Community ties
What is occupational immobility
The inability to move between jobs because of a lack of relevant, transferable skills, education and experience
How can we solve structural unemployment
Through the use of supply side policies
What is frictional unemployment
Usually low level, short term unemployment caused by people leaving their current job with the aim of finding a better job
Why is frictional unemployment considered a positive sign
Due to workers believing that new jobs and opportunities are available
Why does full employment still mean there is 2/3% unemployment
These unemployed people are mainly frictionally unemployed
How can we reduce frictional unemployment, give a real world example
The internet: allowing people to find their new jobs to start right when they leave their previous job
Websites like indeed can aid in this
What is under employment
Where workers are employed but not fully utilising their skills, they could be more productive
What does unemployable mean
The idea that over time workers lose the skills & personal ,motivation to work and find it difficult to become employed
How long is long term unemployment
Over a year
What is the age range for youth unemployment
18-24
What are 5 costs of unemployment
Society costs
Individual costs
Lost output
Lower standard of living
Lower government budget
Give 3 examples of society costs of unemployment
Crime
Anti social behaviour
Drug use
Give 3 examples of individual costs of unemployment
Loss of self worth
Psychological problems
Unemployment trap
Explain how unemployment leads to a decrease in the government budget
Increased spending on welfare
Decrease in tax revenue (Income, N.I, VAT)
How does a lower government budget due to unemployment affect the economy
Less spending on healthcare, infrastructure, education etc
Draw the diagram for real wage unemployment
What is on the X and Y axis on the diagram for real wage unemployment
X- Q of labour
Y - Wage
Explain real wage unemployment
Unemployment is an excess supply of labour, meaning the labour market failed to find equilibrium
To remove this, wages must fall to restore equilibrium
However there are imperfections in the labour market which prevent wages from falling
Therefore real wage unemployment remains
Quick definition: (where wages are set above equilibrium level causing excess supply of labour)
Keynes said wages are sticky downwards, what does this mean
When they go up, they rarely go down
What are 3 imperfections in the labour marker which stop wages falling to restore equilibrium and eliminating real wage unemployment
Minimum wage
Trade unions
Worker rights (contractual/legal)
Draw and explain a diagram showing the creation of real wage unemployment due to decreased demand of a good
Demand decreases
Labour is a derived demand so demand for labour decreases
However wages cannot fall as they are sticky downwards (and workers have rights)
Therefore real wage unemployment is created from Q to Q2
What is the natural rate of unemployment
The level of unemployment when the labour market is in equilibrium
Draw and label the diagram for the natural rate of unemployment
Whyis the natural rate of unemployment sustained
By the benefits system and the failure of SSPs
What are the 3 curves on a natural rate diagram
A.J - Accepting Jobs (s)
L.F- Labour force (s)
L.D - Labour demand (d)
Which curve in the natural rate diagram shifts when the natural rate is reduced
A.J shifts right
How can we reduce the natural rate of unemployment
Reforming the benefits system
More effective SSPs (education, training and transport)
Where is the distance of the natural rate of unemployment on a diagram
The difference between L.F (those in labour force) and A.J (those willing to accept a job at the current wage rate L.D=A.J) at the wage rate LD = A.J
Draw the diagram showing real wage unemployment in the natural rate and explain how this displays voluntary unemployment
Give an example of a supply side policy which can aid in reducing structural unemployment
Labour said they will build 1.5 million new houses (lower geographical immobility through lower house prices)
Network North plan - (Higher mobility of labour)
What sector did the UK move away from during its deindustrialisation period
Shifted from manufacturing to financial services and intellectual property
British steel Corp declined
Banks such as Barclays and Lloyds rose
As well as intellectual centres such as oxford and Cambridge which developed (for example oxford developed the firm covid vaccine AstraZeneca)
What is the current youth unemployment figure
As of October to December 2024, the UK’s youth unemployment rate stood at 14.5% for individuals aged 16 to 24, marking an increase from 12.2% during the same period in the previous year.
