Unemployment

Question 1

What are the effects of unemployment?

Answer 1

• Depression
• Lower consumption
• Reduced disposable income
• Reduced productivity if the economy
• Reduced investment
• Lower economic growth
• Lack of confidence in the economy
• Drop in luxury sales

Question 2

How do we measure unemployment?

Answer 2

• Claimant Count (UK & Ireland)

- International Labour Organisation

Question 3

What is the claimant count?

Answer 3

Counts only those who are eligible to claim job seeker’s allowance.

For people who are:

• Out of work
• Available for work
• Actively seeking employment

Question 4

Define the two types of job seeker’s allowance.

Answer 4

Contribution based JSA = If you’ve paid two years of national insurance. This is only paid for 6 months.

Income based JSA = Paid to those on low incomes with low savings.

Question 5

Give 3 advantages of the claimant count.

Answer 5

• Up to date
• Cheap to collect data
• Can compare over time (i.e. now and last year)

Question 6

Give 3 disadvantages of the claimant count.

Answer 6

• Not used in mainland Europe (therefore, cannot compare with other countries)
• Doesn’t include pensioners and students
• Open to miscalculation

Question 7

Explain how the claimant count could be open to miscalculation?

Answer 7

If people are only working part-time, or not in a job they wish to be doing, they may class themselves as unemployed. Consequently, data may be unreliable/falsified.

Question 8

What is the ILO?

Answer 8

International labor organisation.

For people without a job, who want a job and have actively sought out work in the last four weeks, and are able to start in the next two weeks.

• The labor force survey 6’000 people age 16-75
• It is carried out every 3 months

Question 9

Give 3 advantages of the ILO.

Answer 9

• Wider range of people (includes students/OAPs)
• Can compare all European countries with each other
• Accurate, people have no reason to lie (As it is anonymous, which encourages the truth)

Question 10

Give 3 disadvantages of the ILO.

Answer 10

• Expensive
• Irregular, it becomes out of date shortly after publishing
• Still only a survey with no proof of accuracy
• Small sample size in comparison to population
• UK don’t use this so it cannot be compared

Question 11

Define cyclical/Keynesian unemployment.

Answer 11

Cyclical unemployment is involuntary unemployment due to a lack of aggregate demand for goods and services.

Question 12

Define frictional unemployment.

Answer 12

Frictional unemployment is the time period between jobs when a worker is searching for, or transitioning from one job to another. It is sometimes called search unemployment.

Question 13

Define structural unemployment.

Answer 13

Structural unemployment is a form of unemployment where, at a given wage, the quantity of labor supplied exceeds the quantity of labor demanded, because there is a fundamental mismatch between the number of people who want to work and the number of jobs that are available.

Question 14

Define seasonal unemployment.

Answer 14

Seasonal unemployment occurs when people are unemployed at certain times of the year, because they work in industries where they are not needed all year round. Examples of industries where demand, production and employment are seasonal include tourism and leisure, farming, construction and retailing