Unemployment [2.1.3]

Question 1

What is unemployment?

Answer 1

Those without jobs actively looking for work.

Question 2

What does inactive mean?

Answer 2

People do not count as part of the labour force these are people are not working and are not trying to get a job.

Question 3

What is the labour force?

Answer 3

Labour force is the total active population both employed and unemployed.

Question 4

What is the unemployment rate?

Answer 4

Unemployment rate is the number of unemployed as a % of the labour force.

Question 5

Which people are active in the labour force?

Answer 5

Employed - Self employed , Employees , On government schemes , unpaid workers.
Unemployed

Question 6

Which are people are inactive in the labour force?

Answer 6

Looking after family
Short term sick
Discourage workers
Long term sick
Students
Retired

Question 7

What are the Government employment objectives?

Answer 7

Create more Jobs
Increase the activity rates in the country
Reduce unemployment
Reduce underemployment

Question 8

How will following gov policies impact the active/inactive labour force?

Answer 8

Increase the number of young people going to university - Increase number of employed people however more people are not in the labour force.

Free childcare available to working mothers - Increase active labour force can afford to go back to work earlier

Reduction in benefits for unemployed people - Encourage more people to go to work however more people could become inactive

Increase in immigration from other countries - Increase inactive and active workers increase employment and underemployment

Increase in age when state pension when will be paid - Active and employed bracket much longer

Question 9

What are the 4 main causes of unemployment?

Answer 9

Seasonal
Structural
Frictional
Cyclical

Question 10

What is seasonal unemployment?

Answer 10

Regular seasonal changes in employment due to changes in labour demand

Question 11

What is Structural unemployment?

Answer 11

When changes in the economy mean that skills do not match opportunities .Linked to labour immobility. It is hard to change skills and move into a different job. Changes in structure of the economy

Question 12

What is Frictional unemployment?

Answer 12

Transitional unemployment due to people moving between jobs.

Question 13

What is Cyclical unemployment?

Answer 13

Caused by a fall or persistent weakness of aggregate demand leading to a decline in GDP. Change in the business cycle.

Question 14

What is Real Wage unemployment?

Answer 14

Real wage unemployment happens if wages are too high for the demand and supply conditions. This may happen when minimum wages are too high or unions have negotiated higher wages.

Question 15

What is Migration and unemployment problems?

Answer 15

Migration can be beneficial and detrimental to UK employment and unemployment

If the in migrant workers have complementary skills to those of native workers it has beneficial impacts as there is an increase in supply of labour increasing potential economic output.

However if in migrants substitute domestic workers this could force down equilibrium wages.

Question 16

What are the 2 ways of measuring unemployment?

Answer 16

The Claimant account
Labour force survey

Question 17

What is the claimant account?

Answer 17

The number of people claiming the Jobseeker’s allowance benefit

Question 18

What is the labour force survey?

Answer 18

An internationally agreed measure of unemployment. Data collected via a survey that is carried out every 3 months.

Question 19

What are the benefits and disadvantages of the claimant account?

Answer 19

Records those claiming unemployment benefits and are actively looking for work.

May not reflect the true level of unemployment in the UK economy given that not all the unemployed will bother to claim benefits. Some will bother not to claim and some are deterred because they cannot prove they are looking for work. part time employees less likely to register. Some will fraudulently claim. It underestimates employment levels

Question 20

What are the benefits and disadvantages of the International Labour Organisation (ILO)?

Answer 20

The ILO is a more direct assessment of unemployment rather than those who claim benefit. All members of the EU must use the ILO standardised measure of unemployment. Based on the quarterly survey of approx. 40,000 households and 80,000 individuals to be considered unemployed an individual must

1) Have been out of work for 4 weeks
2) Be able to start work in the next 2 weeks so they must be readily available for work.
3) Workers only need to be available for work for one hour per week, so part time employment is included in this measure unlikely to claim unemployment benefits ILO is much higher than claimant account

However the labour force survey has become Govs official measure of unemployment. However critics argue that it overestimates true unemployment by including people only looking for part time work. Also subjective subject to sampling error.

Question 21

What are the impacts of unemployment on workers?

Answer 21

Those who are unemployed normally have a loss of income which usually results in a decline in their living standards.
Often suffer from stigma of being unemployed feel degraded because of claiming benefits. This can lead to stress, breakdowns and physical illness.
Long term unemployed often find it more difficult to get another job as they lose skills.
Those in jobs suffer from lower job security will fear being made redundant also see a fail in wages as firms can easily replace them.

Question 22

What are the impacts of unemployment of firms?

Answer 22

There will be a decrease in demand for their goods. Also lead to a fall in profit.
Long term unemployment lead to loss of skills and reduce employability of workers, so firms have a smaller pool of skilled people to employ.
They can offer lower wages as people will take the job anyway as they know there is a lack of jobs so have few options.

Question 23

What are the impacts of unemployment on consumers?

Answer 23

Consumers in areas of high unemployment lose out because shopping centres are run down will not often a range of shops available in these areas. Consumers will have less choice. The quality of goods may decrease.
The unemployed consumers lose out as they have less available to spend.
However firms may lower prices and put on sales to increase demand.

Question 24

What are the impacts of unemployment on the Government?

Answer 24

Reduced income results in a fall in tax revenues and higher spending on welfare payments for families with people out of work, incurring an opportunity cost money spent elsewhere.
Increase in budget deficit, likely that the government will raise taxation or decrease public spending. Increase in borrowing.

Question 25

What are the impacts of unemployment on society as a whole?

Answer 25

Rising unemployment leads to social deprivation. Increase in crime.
Areas of high unemployment often see fall in demand for goods and services causing a fall in income for those working in services increase loss of jobs.
It will result in loss of potential national output cause inefficient use of resources.