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IB Economics Outside Flashcards > Unemployment > Flashcards

Unemployment Flashcards

1
Q

unemployment

A

condition of someone of working age who is willing and able to work, actively seeking employment, but unable to find a job

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2
Q

unemployment rate

A

percentage of the total labor force in a nation that is unemployed

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3
Q

unemployment rate equation

A

number of unemployed / labor force *100%

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4
Q

labor force

A
  • employed
  • self-employed
  • unemployed
  • people in government training schemes
  • military
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5
Q

Why do unemployment rates vary depending on country?

A
  • existence of social safety nets
  • education levels of workforce
  • evolving structures of economy
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6
Q

labor force participation rate

A

proportion of working age population that is either unemployed or employed

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7
Q

what is not included when measuring labor force?

A

working age population population

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8
Q

How is unemployment measured?

A

claimant system ILO survey

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9
Q

What is the advantage of ILO over claimant system?

A

ILO incorporates unregistered unemployed as well so tends to show higher levels of unemployment

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10
Q

underemployment

A

condition of a worker who is technically employed, but is either over-qualified or is working part-time when full-time work is desired

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11
Q

do unemployment figures take underemployment into account?

A

no

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12
Q

What are the individual consequences of unemployment?

A
  • decreased household income and purchasing power
  • increased levels of psychological and physical illness (stress and depression)
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13
Q

What are the social consequences of unemployment?

A
  • downward pressure on wages for the employed (high unemployment = increased labor supply so workers must take pay cuts)
  • increased poverty and crime transformation of traditional societies (large-scale migrations and social upheaval)
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14
Q

What are the economic consequences of unemployment?

A
  • lower level of AD (consumption decreases), precautionary saving rises
  • under-utilization of nation’s resources
  • Brain-drain (workers leave nation to find jobs - production possibilities of nation decrease)
  • Turn towards protectionism and isolationist policies (cheap foreign products blamed for unemployment so increase tariffs and increased domestic subsidies - will lead to market being less competitive globally because misallocating resources)
  • Increased budget deficits (unemployed take benefits and pay no tax)
  • Wastes resources invested in training and educating workers
  • Growth potential of nation decreases
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15
Q

What are the two broad categories of unemployment?

A

equilibrium dis-equilibrium

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16
Q

What are the types of equilibrium unemployment?

A
  • frictional
  • seasonal
  • structural
  • technological
  • consumption
  • location
  • regional
17
Q

equilibrium unemployment

A

unemployment that exists when the market is at equilibrium (like circular flow)

18
Q

frictional unemployment

A

voluntary unemployment due to people moving between jobs and who are engaged in job search

19
Q

seasonal unemployment

A

jobs that do not last year round (e.g. agricultural workers)

20
Q

structural unemployment

A

people made jobless because of capital-labor substitution’, long run decline in labor demand causes lay-offs

21
Q

technological unemployment

A

human jobs replaced by machinery (labor intensive to capital intensive)

22
Q

consumption unemployment

A

if consumption patterns change, have to change skills

23
Q

location unemployment

A

producers move country to decrease costs (cheaper labor)

24
Q

long term unemployed

A

number of people out of work for at least one year

25
Q

working population

A

population of working age

26
Q

participation rate

A

percentage of working population who are in labor force

27
Q

vacancies

A

number of registered jobs available but as yet unfilled

28
Q

employment rate

A

percentage of population of working age that is in a job

29
Q

hysteresis effect

A
  • damage that unemployment does to skills and employability of people out of work
  • longer out of job, less attractive to employers
  • technical and social skills decline -> higher structural unemployment and natural rate of unemployment
30
Q

hidden unemployment

A
  • long-term unemployed give up active search for work and leave labor market
  • no longer counted in unemployment statistics
31
Q

benefits of unemployment

A
  • dampening inflationary pressures: bargaining power of workers to bid for higher pay lower so inflation decreases (cost-push inflation)
  • environmental: slower rate of growth reduces pressure on resources
  • greater pool of unemployed workers to take up new jobs when become available (depends of occupational mobility)
  • entrepreneurship opportunities: labor resources free to find more productive uses (start businesses)
32
Q

Natural rate of unemployment

A
  • frictional, structural, seasonal unemployment
  • aggregate supply of labor represents members of working age population willing and able to work, skills might be mismatched for labor demanded
33
Q

cyclical unemployment and graph

A
  • occurs when workers have skills which are in demand but lose their jobs due to a fall in total demand for the nation’s goods and services
  • arises due to fluctuations in the nation’s business cycle
  • aka demand-deficient unemployment
  • contraction in public or private spending reduces AD and leads to fall in national output; downward pressure on wages and prices
  • wages inflexible in short run, disequilibrium where total demand for labor falls but wages remain high creating surplus of labor
  • TLF = total labor force
34
Q

neoclassical AS wage assumption

A
  • wages and prices are perfectly flexible and so adjust to level of demand so ouput always at full employment level
  • more possible in long run
35
Q

Keynesian AS wage assumption

A
  • businesses will cut number of workers, not wages in short run

IB Economics Outside Flashcards (29 decks)

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