Unemployment Flashcards
What is Unemployment?
Unemployment is a condition where workers who are ordinarily a part of the labour force are unable to find work at prevailing wages
What is Unemployment Rate?
Unemployment rate is the percentage of the labour force that is not working.
How is the unemployment ate calculated?
Unemployment rate = Unemployed/Labour force x 100
What is the Labour Force?
The labour force is the number of persons who are employed plus those who are unemployed but are actively seeking work.
How is the labour force calculated?
Labour force = employed + unemployed
What is Potential Population?
Potential Population includes those who are in the labour force plus those who are of working age but not in the labour force
What is Full Employment?
Full Employment is a situation in which everyone who is willing and able to work can find a job
What is the labour force participation rate?
The labour force participation rate is the ratio of the labour force to the total working age population
How is labour force participation rate calculated?
Labour force participation rate = Labour force/ population x 100
What is Underemployment?
Underemployment is where individuals accept a job for which they are overqualified
What is the potential labour force?
The potential labour force accounts for all the individuals in the economy who are of working age and are not institutionalized
Who are Discouraged workers?
Discouraged workers are persons without jobs who are not actively seeking employment and are not considered apart of the labour force
What are two demand-side policies used to address unemployment?
Expansionary Fiscal Policy
Expansionary Monetary Policy
What are two supply side policies used to address unemployment?
Training and retraining
Abolition of wage floors ( minimum wage)
Reduction of employees and trade unions rights
What are some costs of unemployment?
Lower GDP
Lower Tax Revenue
Increased Welfare Payments
Human Cost of Unemployment
Explain lower output as a cost of unemployment
The basic economic cost of unemployment is foregone output.
When the economy fails to create enough jobs for all who are able and willing to work, potential production of goods and services is irretrievably lost.
The economy would be operating within its PPF.
Explain lower tax revenue as a cost of unemployment
The government will lose tax revenue that would be earned through income tax from workers’ income. In addition, high unemployment restricts the amount of consumer
spending and so consumption tax revenue will also fall
Explain increased welfare payments as a cost of unemployment
Government will have to allocate more of the country’s limited resources to welfare and
unemployment relief programmes.
At lower unemployment rates, the government could have diverted this fund to other areas.
Explain human cost of unemployment
Unemployment can negatively affect workers’ morale. This can result in anxiety, depression, suicide and increase in crime and violence among other things.
