Unemployment

Question 1

Define labour force?

Answer 1

Number of workers employed + number of workers unemployed

L=E+U

Question 2

Define economically active?

Answer 2

People who have/are able to take jobs

Question 3

Define economically inactive?

Answer 3

People who do not want jobs (adults only)

Question 4

What is the definition of people who do not want jobs?

Answer 4

People who has not seeker jobs in last 4 weeks and/or not ready to start in next 2 weeks

Question 5

Adult population = ?

Answer 5

E+U+number of economically inactive people

Question 6

Define employed?

Answer 6

Anyone doing min of 1hr paid work/week

Question 7

Define unemployed?

Answer 7

Anyone without a job but actually seeking one

Question 8

Rough size of UK labour force, E, U and Inactive?

Answer 8

L = 41million
E = 30.5million
U = 1.6million
Inactive = 8.9million

Question 9

What age range does employment and adult population include?

Answer 9

16-99years

Question 10

What age range does unemployment and inactiveness include?

Answer 10

16-64years

Question 11

See pages 5-7 L11

Answer 11

Now

Question 12

Why is rising unemployment not always a sign of worsening economy?

Answer 12

If those people are going from inactive to unemployed then workers aren’t necessarily being laid off

Question 13

4 important worker characteristics that can affect the probability of them finding a job?

Answer 13

Qualifications
Job skills
Employment length
Unemployment length

See notes

Question 14

How is the labour force survey conducted?

Answer 14

Every 3months roughly 80K are surveyed, series of Q’s determine employment levels

Question 15

How does the claimant count measure unemployment?

Answer 15

Uses number of people receiving benefits due to unemployment (JSA+NIC+UC)

Question 16

Define unemployment rate?

Answer 16

% of unemployed economically active people

Question 17

Remember

Answer 17

If the number of economically active people falls, LF falls tf rate of unemployment increases even though number of employed remains the same

Question 18

Define natural rate of unemployment?

Answer 18

Average rate of unemployment around which the economy fluctuates

Question 19

2 factors that influence the unemployment rate?

Answer 19

Rate at which employed workers lose/leave their jobs

How quickly unemployed workers find jobs

Question 20

What is the rate of job separation (s)?

Answer 20

The fraction of employed workers who lose/leave their jobs

Question 21

What is the rate of job finding (f)?

Answer 21

Fraction of unemployed workers finding jobs

Question 22

Explain how a change in f or s may influence the natural rate of unemployment?

Answer 22

A policy will REDUCE the natural rate of unemployment if it:
- increases f
Or
- decreases s

Question 23

2 reasons why job finding isn’t instantaneous and explanations?

Answer 23

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)

Question 24

Define frictional unemployment?

Answer 24

Unemployment that results from the time that it takes to match workers with jobs

Question 25

3 reasons ‘matching workers to jobs’ isn’t instantaneous?

Answer 25

Different abilities, preference, geographical mobility etc

Different skill requirements, wages etc

Changes in demand/firms failing

Question 26

2 policies to decrease job search time and briefly how they work?

Answer 26

1) government employment agencies (decreases imperfect information between buyers and sellers of labour)
2) job training programmes (retrain workers tf new skills)

Question 27

Policy to decrease hardship of unemployment?

Answer 27

Benefits

Question 28

Define structural unemployment?

Answer 28

Unemployment resulting from wage rigidity and job rationing (too much supply of L tf robs rationed among workers)

Question 29

3 reasons for wage rigidity?

Answer 29

Minimum wage laws
Power of labour unions
Efficiency-wage (idea that higher wage leads to increased efficiency tf worth it)