unemployment chapter 19 Flashcards
unemployment
the state of being willing and able to work but not having a job
homemakers
people who look after the household of their own families
economically inactive
people who are not in the labour force
labour force
the employed and the unemployed. the total number of workers available for work.
economically active
people in the labour force
factors affecting the size of a country’s labour force
the school leaving age
the number of people who remain in full time education above the school leaving age
the retirement age
the proportion of women who join the labour force
labour force participation rate
the proportion of the population that are of working age and who are either working or actively seeking work. the rate is usually between 50% and 70%
factors that can make the labour force participation rate low
higher participation in higher education and a relatively large proportion of workers deciding to take early retirement . some countries have low contribution of women in the labour force because of social and cultural factors
level of unemployment
the number of workers who are unemployed
unemployment rate
unemployed workers as a percentage of the labour force
formula for unemployment rate
(number of people unemployed/number of people in the labour force) x 100
how does the level and rate of unemployment move
The level and rate of unemployment may move in the same direction. This, however, is not always the case. If the labour force increases by a greater percentage than the level of unemployment, the unemployment rate will fall.
employment rate
employed workers as a percentage of the population of working age.
why does the employment rate not add up to 100%
This is because the employment rate is the proportion of the working age population who are in work and not the proportion of the labour force in work.
how is stock of unemployment measured
A stock is measured at a particular time period
how is the flow of unemployment measured
flow is measured over time.
what does the level of unemployment and the unemployment rate show
unemployment at a particular time period. They are a snapshot of unemployment at a certain point in time. They do not show the exact situation as people move into and out of unemployment.
discouraged workers
workers who would like a job but who have given up actively seeking work after a period of trying to find work.
why can the number of unemployed stay the same over a period of months
This does not necessarily mean that it is the same people, because some workers will have become unemployed over the time period while others will have found jobs or will have left the labour force.
reasons why people may enter unemployment
Left school or university
Made redundant
Voluntarily left job
Improved health
Stopped being a homemaker
Migrated into the country
reasons why people may leave employment
Entered higher education
Found employment
Became ill
Became a homemaker
Became a discouraged worker
Emigrated
measures of unemployment
claimant count measure
labour force survey measure
claimant count measure
a measure of unemployment based on those claiming unemployment benefits.
labour force survey measure
a measure of unemployment based on a survey that identifies people who are actively seeking a job. more widely used than claimant count measure
advantages of claimant count measure
is relatively cheap and quick to calculate as it is based on information that the government collects as it pays out benefits.
disadvantages of labour force survey measure
the figure obtained may not be entirely accurate.
why may the figure obtained by the government based on the benefits it pays out
It may overstate or understate the true figure. It may include some people who are not really unemployed and may omit some people who are genuinely unemployed. Some of those receiving unemployment benefits may not be actively seeking employment and some may be working and claiming benefits illegally. there may be a number of groups who are actively seeking employment but who do not appear in the official figures.
why do some groups actively seeking employment not appear on the figure obtained by the government based on the benefit it pays out
These groups may include those who are too young or too old to claim unemployment benefits, those who choose not to claim benefits they are entitled to, those who are full-time students looking for work and those whose non-employment income is too high.
how does labour force survey measure take place
the measure involves conducting a survey, usually using the International Labour Organisation (ILO) definition of unemployment. The definition includes as unemployed all people of working age who, in a specified period, are without work, but who are available for work in the next two weeks and who are seeking paid employment.
advantages of labour force survey measure
The labour force measure picks up some of the groups not included in the claimant count. it is based on internationally agreed concepts and definitions, so makes international comparisons easier. More information is found.
disadvantages of labour force survey measure
the data are more expensive and time-consuming to collect than the claimant count measure. as the data are based on a sample survey, they are subject to sampling error and to the practical problems of data collection.
sampling error
the people being surveyed having different characteristics or experiences to the rest of the population.
causes of unemployment
frictional unemployment
structural employment
cyclical unemployment
cause of unemployment: frictional unemployment
unemployment that is temporary and arises when workers are in-between jobs. forms of frictional unemployment are voluntary unemployment, search unemployment, casual unemployment and seasonal employment
form of frictional unemployment: voluntary unemployment
unemployment resulting from the unemployed choosing not to accept jobs at the going wage rate and working conditions. influenced by the level of unemployment benefits compares to low wages
how does is the level unemployment benefits affect voluntary unemployment
If the amount workers can earn in employment is less than they can receive in benefits, some workers may decide to stay unemployed. In most countries, the amount of unemployment benefit workers receives falls after a period of time
form of frictional unemployment: search unemployment
unemployment that exists when people take time looking for a job they are willing to accept.
how can search unemployment be reduced
The provision of more and better-quality information may reduce search unemployment
form of frictional unemployment: casual unemployment
unemployment that occurs when people have left one short-term job and before they take up another short-term job.
form of frictional unemployment: seasonal unemployment
unemployment arising at particular times of the year when demand for the product falls.
cause of unemployment: structural unemployment
unemployment caused as a result of the changing structure of economic activity. Over time, the pattern of demand and supply changes. Demand for some products decreases while demand for other products increases thus some industries expand and some industries contract. Methods of production change, often driven by advances in technology.
how does changes in demand affect structural employment
During this time, there may be a mismatch between job vacancies and the skills, qualifications, experience and geographical location of those who have lost their jobs.
why do people stay structurally unemployed
If workers cannot move from one industry to another industry, due to a lack of geographical or occupational immobility, they may stay structurally unemployed for some time.
forms of structural unemployment
regional unemployment
technological unemployment
international unemployment
forms of structural unemployment: regional unemployment
unemployment arising from a decline in job vacancies in a particular area of the country.
forms of structural unemployment: technological unemployment
unemployment caused by advances in technology.
forms of structural unemployment: international unemployment
unemployment arising when a country loses its international competitiveness in producing a product or products.
causes of unemployment: cyclical unemployment
unemployment that results from a lack of aggregate demand. also known as demand deficient unemployment.
causes of unemployment: cyclical unemployment
unemployment that results from a lack of aggregate demand. also known as demand deficient unemployment.
how does cyclical unemployment affect economy
affects economy with job loses occurring across a range of industries. the economy is showing signs of slowdown which is not good.
why will cyclical unemployment still exist even after a fall in wage rates
This is because a cut in wages would reduce demand for goods and services as people would have less money to spend, which would cause firms to reduce both their output further and make more workers redundant (lose their jobs).
consequences of unemployment for workers
Workers who lose their jobs are likely to experience a fall in income. Unemployed people are likely to find it more difficult to get another job the longer they have been out of work beacause they will miss out on training, will become out of touch with advances in technology and may lose confidence. They may also experience a decline in their physical and mental well-being.
how does frictional unemployment help unemployed
For a small number of people, there is a chance that a period of frictional or structural unemployment may give them the opportunity to search for a job they may enjoy more and which may be better paid.
consequences of unemployment to firms
Firms wanting to expand may have a greater choice of potential workers. Frictional unemployment allows the economy to respond quicker to changes in demand and supply conditions, with workers moving from declining to expanding industries. Firms may also benefit from workers not requesting wage rises for fear of losing their jobs. Firms may, however, suffer from lower demand for their goods and services.
consequences of unemployment on the economy
The economy will experience an opportunity cost. Output will be below its potential level. If the unemployed were still working, more goods and services would be produced and living standards would be higher. The tax revenue received by the government will be lower than with a higher level of employment. If state benefits are paid by the government, there will be an increase in government spending on the benefits which could have been put to other purposes.
consequences of unemployment on the government
The tax revenue received by the government will be lower than with a higher level of employment. If state benefits are paid by the government, there will be an increase in government spending on the benefits which could have been put to other purposes.
what affects unemployment
depends upon its rate, duration and type
what does a high rate of unemployment mean
it means that the economy is producing well inside its PPC, forgoing a large quantity of output
what happens when the duration of unemployment increases
Unemployment is also more significant the longer the workers are employed. The income of the long-term unemployed will be low. They may suffer poor mental health because of the stress of being out of work. The chances of workers gaining employment tends to fall the longer they are out of work.
how are the chances of workers gaining unemployment affected by the duration of unemployment
This is for a number of reasons. The skills of the unemployed may become outdated, they may lose confidence and some may become discouraged workers. Employers may also be reluctant to employ those who have been out of work for a relatively long time.
why is frictional unemployment the least serious type of unemployment
frictional unemployment does not increase during an economic recession. some level of frictional unemployment is unavoidable in a changing economy
why is cyclical unemployment the most serious type of unemployment
problems. Cyclical unemployment may be of a high rate last a long period of time. Cyclical unemployment generally rises during recessions and falls during economic expansions and is a major focus of economic policy
why do governments seek to keep unemployment as low as possible
the harmful effects of unemployment outweigh any beneficial effects. governments want to achieve is to avoid structural and cyclical unemployment
why can unemployment be zero
The demand and supply of labour is always changing, with some workers having a time gap between leaving one job and taking up another job.
why is low unemployment not always a strong sign of a strong economy
unemployment is not always a sign of a strong economy. Some workers may be in low-paid and insecure jobs. Other workers may be experiencing underemployment.
why should the reason for a fall in a country’s unemployment be examined
If the fall results from previously unemployed workers gaining good quality jobs, it is likely to be beneficial. However, this is unlikely to be the case if the reduction in the rate has been caused by the unemployed giving up on trying to find work.
underemployment
a situation where people are working fewer hours than they would like or working in jobs that they are overqualified for.
