Unemployment Flashcards
Who is considered Economically Inactive?
those NOT in the Labour Force
What is the Labour Force?
Labour Force = No. of Employed + No. of Unemployed people
How is the Unemployment Rate calculated?
Unemployment Rate = [No. of Unemployed / Labour Force] x 100
Define Labour Force Participation Rate
% of Adult Population in the Labour Force
How is the Labour Force Participation Rate calculated?
L.F - P.R = [Labour Force / Adult Population] x 100
What are the 2 main Measures of Unemployment?
- Claimant Count
2. Labour Force Survey
How is the Claimant Count conducted?
Measures No. of people claiming Unemployment related benefits relative to the No. of people paying Income Tax
What is the main issue with the Claimant Count?
No. of people eligible to claim benefits changes
How does the Labour Force Survey work?
Asks people directly
Why can the Rate of Unemployment differ?
- Age, Sex, Ethnicity…
- Different Groups have different Participation rates
What. is L.F-P.R affected by?
- Women’s role in Society
- New Technologies - easier to access Labour Market
- Improved Birth Control
- Changing Political + Social attitudes
Why has Men’s Participation decreased?
- Younger Men stay in Education
- Older men retire earlier + live longer
- More Women working–> more men stay at home
Who is NOT part of the Labour Force?
- Full-time Students
- Retirees
- Stay-at-home Parents
- Full-time Carers
Define Natural Rate of Unemployment
Unemployment which does NOT go away, even in LR
–> NRU around which Unemployment Rate fluctuates
Define Cyclical Unemployment
Deviation of Unemployment from its Natural Rate
Whats the general Pattern of Unemployment?
Movements into + out of Labour Force are common
– More than 1/3 of Unemployed- recent entrants
What are Discouraged Workers?
Unemployed who do NOT find a job + still want to work- BUT Give Up looking
What type of Unemployment is often Observed + why?
Long Term Unemployment often observed at any given time
– Most Unemployment is Short Term- NOT captured by Measures as New Jobs often found
What are the 2 main components to the NRU?
- Structural Unemployment
- Frictional Unemployment
How is Structural Unemployment caused?
Min. Wages
Unions
Efficiency Wages
–> Above-Equilibrium Wages–> Unemployment
How is Frictional Unemployment caused?
- Changes in Demand for Labour among diff. firms
- Changes in Composition of Demand among industries or regions
What is Search Unemployment?
Unemployment while Workers + Employers match
- takes time for them to match
Policy for Frictional Unemployment
- Aim to Reduce Time for Unemployed to find jobs
- Retrain people with ‘unwanted’ skills
- -> Decrease NRU
- Gov. Programmes- Facilitate job search
- -> e.g. Job Centres + Public Training programmes + Apprenticeships
Policy for Structural Unemployment
Controversial- Aims to Reduce Real Wages
- Reduce / Shorten duration of Unemployment benefits
- Reduce Min. Wage
- Easier to Hire/Fire workers
- Improve Wage Flexibility
How does Min. Wage cause Unemployment?
Forces Wages above Equilibrium level
- -> Increased Labour Supply + Decreased Labour Demand
- -> Surplus of Labour- Unemployment
What is a Union?
Worker Association
- Bargains with Employers over Wages, Benefits + Worker Conditions
How do Unions cause Unemployment?
Push Wages above Equilibrium
- Unemployment / harder to find a job
Who are the Winners + Losers of Unions?
Winners- Employed who benefit from Higher Wage (Insiders)
Losers- Unemployed (Outsiders)
How else do Unions affect the Labour Market?
Lower Flexibility–> Harder to Lower Salaries + Fire Workers
What are Efficiency Wages?
Increase Wages to Increase Productivity
- May be due to Increased Motivation
- Higher Wage –> Better Health –> Higher Productivity
- Attract Better Workers
