Unemployment Flashcards
how do you measure unemployment?
(unemployed / labour force) x 100
what are the two ways of measuring employment?
claimant count and labour force survey
what is a claimant count?
the number of people claiming JSA.
what are the limits of the claimant count?
you can’t claim until you have been unemployed for at least 4 weeks.
some people don’t claim as they don’t need it or they are too proud.
what is the labour force survey?
internationally recognised questionnaire
what are the limits with the labour force survey?
people can lie, only as accurate as the sample.
what are the causes of unemployment?
- structural
- cyclical
- frictional
- immobility
what is structural unemployment?
The concept that the unemployed do not have the skills or experience to take up available vacancies.
what is cyclical unemployment?
People lose their jobs when the economy is in recession and find jobs when the economy is growing. When people are spending more money (interest rate cut) firms need a higher supply and thus a higher amount of workers in order to meet demand therefore unemployment rates will fall. And vice versa.
what is frictional unemployment?
People that are out of work yet have work lined up for them soon. (Not an important cause.)
what is immobility of labour?
Restraints such as the commute (in terms of time and cost), households (current and in desired area) and one’s social life make the unemployed less willing/able to move towards the work.
what are the consequences of unemployment for the individual?
Stress and health problems of being unemployed – amongst studies of unemployed men, signs of depression anxiety and health problems are noticeably higher.
Loss of earnings to the unemployed – unemployment is one of the biggest causes of poverty.
Potential homelessness – loss of income leaves people sufficient income to meet housing costs. Also known as ‘hysteresis’
Harms future prospects – those who are unemployed will find it more difficult to get work in the future.
Lower incomes usually result in a lower standard of living.
what are the consequences of unemployment for the economy/society.
Increased government borrowing - higher unemployment will cause a fall in tax revenue because there is fewer people paying income tax and also spending less (hence lower VAT). Also, the government will have to spend more on unemployment and related benefits. The government doesn’t just pay unemployment benefit, but a family who has unemployment will be more likely to receive housing benefit and income support. One study shows that the cost to the Exchequer for one person being unemployed is £6,243 a year in benefits and lost tax revenue.
Lower GDP for the economy – high unemployment indicates the economy is operating below full capacity and is inefficient; this will lead to lower output and incomes. The unemployed are also unable to purchase as many goods, so will contribute to lower spending and lower output. A rise im unemployment can cause a negative multiplier effect.
Increase in social problems – areas of high unemployment (especially youth unemployment) tend to have more crime and vandalism. It can lead to alienation and difficulties in integrating young unemployed people into society.
Political instability – the period of mass unemployment in the 1930’s led to social unrest. In Germany, an unemployment rate of 6 million was an important factor in the rise of Hitler and the Nazi party.
Less consumer spending – less consumption – lower AD – lower demand.
Increased transfer payments – less money available for various other areas of government spending.
