Unemployment Flashcards
Define labour force?
Number of workers employed + number of workers unemployed
L=E+U
Define economically active?
People who have/are able to take jobs
Define economically inactive?
People who do not want jobs (adults only)
What is the definition of people who do not want jobs?
People who has not seeker jobs in last 4 weeks and/or not ready to start in next 2 weeks
Adult population = ?
E+U+number of economically inactive people
Define employed?
Anyone doing min of 1hr paid work/week
Define unemployed?
Anyone without a job but actually seeking one
Rough size of UK labour force, E, U and Inactive?
L = 41million E = 30.5million U = 1.6million Inactive = 8.9million
What age range does employment and adult population include?
16-99years
What age range does unemployment and inactiveness include?
16-64years
See pages 5-7 L11
Now
Why is rising unemployment not always a sign of worsening economy?
If those people are going from inactive to unemployed then workers aren’t necessarily being laid off
4 important worker characteristics that can affect the probability of them finding a job?
Qualifications
Job skills
Employment length
Unemployment length
See notes
How is the labour force survey conducted?
Every 3months roughly 80K are surveyed, series of Q’s determine employment levels
How does the claimant count measure unemployment?
Uses number of people receiving benefits due to unemployment (JSA+NIC+UC)
Define unemployment rate?
% of unemployed economically active people
Remember
If the number of economically active people falls, LF falls tf rate of unemployment increases even though number of employed remains the same
Define natural rate of unemployment?
Average rate of unemployment around which the economy fluctuates
2 factors that influence the unemployment rate?
Rate at which employed workers lose/leave their jobs
How quickly unemployed workers find jobs
What is the rate of job separation (s)?
The fraction of employed workers who lose/leave their jobs
What is the rate of job finding (f)?
Fraction of unemployed workers finding jobs
Explain how a change in f or s may influence the natural rate of unemployment?
A policy will REDUCE the natural rate of unemployment if it:
- increases f
Or
- decreases s
2 reasons why job finding isn’t instantaneous and explanations?
1) job search: unemployment due to frictional unemployment
2) wage rigidity: unemployment due to failure of wages to adjust to a level where L(s)=L(d)
Define frictional unemployment?
Unemployment that results from the time that it takes to match workers with jobs
3 reasons ‘matching workers to jobs’ isn’t instantaneous?
Different abilities, preference, geographical mobility etc
Different skill requirements, wages etc
Changes in demand/firms failing
2 policies to decrease job search time and briefly how they work?
1) government employment agencies (decreases imperfect information between buyers and sellers of labour)
2) job training programmes (retrain workers tf new skills)
Policy to decrease hardship of unemployment?
Benefits
Define structural unemployment?
Unemployment resulting from wage rigidity and job rationing (too much supply of L tf robs rationed among workers)
3 reasons for wage rigidity?
Minimum wage laws
Power of labour unions
Efficiency-wage (idea that higher wage leads to increased efficiency tf worth it)
