Unemployment Flashcards by Saleh Taha

What is unemployment

Those without a job, who are looking for work and prepared to accept a job at the current wage rate

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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

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Which people are part of the claimant count

Those eligible to receive job seekers allowance

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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

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What are the 3 types of unemployment

Cyclical
Structural
Frictional

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What is cyclical unemployment

Caused by a lack of AD in the economy

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When is cyclical unemployment typical

It is a feature of a recession and is associated with a negative output gap

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How can cyclical unemployment be solved

By increasing AD in the economy (e.g. decrease interest rates)

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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

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What are the two reasons why a decline in certain industries creates structural unemployment

Geographical immobility
Occupational immobility

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Give two examples of geographical immobility

House prices being too high where jobs are available
Family/Community ties

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What is occupational immobility

The inability to move between jobs because of a lack of relevant, transferable skills, education and experience

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How can we solve structural unemployment

Through the use of supply side policies

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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

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Why is frictional unemployment considered a positive sign

Due to workers believing that new jobs and opportunities are available

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Why does full employment still mean there is 2/3% unemployment

These unemployed people are mainly frictionally unemployed

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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

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What is under employment

Where workers are employed but not fully utilising their skills, they could be more productive

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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

16-24

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 (when the economy is healthy)

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) T-levels study from home

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

In December 2024 to February 2025, the UK youth unemployment rate (for 16-24 year olds) was 14.6% which represents a significant increase from the previous year, where the rate was 12.8% 12.8--> 14.6

What type of unemployment is the natural rate made up of

The natural rate of unemployment includes frictional and structural unemployment, but not cyclical unemployment, since it represents the level of unemployment when the economy is operating at full health

What 3 main cities is network North planning to connect

Liverpool, Manchester, Leeds

How much of T levels can be completed at home and how does this help structural unemployment

Allowing up to 20% of T Level industry placements to be completed remotely—and up to 50% for Digital T Levels—expands access to training, helping to reduce structural unemployment by equipping individuals with industry-relevant skills that align with current job market demands