Unemployment - Macro Flashcards
What is unemployment?
The number of people in the labour force that are unemployed
What are the two main methods used to calculate unemployment?
- Claimant count
- Labour force survey
What does the claimant count do?
Tracks the number of people claiming Job Seekers Allowance
What are the the advantages of using the claimant count to measure unemployment?
- cheap
- easy to collect data (as it is computerised)
- can be updated regularly
What are the disadvantages of using the claimant count to measure unemployment?
- generally underestimates the number of unemployed people because not everyone claims unemployment benefits
- because the allowance is controlled by the government, figures are easily manipulated eg if the government makes it more difficult to claim
What is the labour force survey?
A survey sent around households which asks is people are employed and actively seeking work
What are the advantages of using the labour force survey to measure unemployment?
- more accurate as data is being collected from real people, not a machine
- internationally acceptable measure of unemployment therefore data can be compared globally
What are the disadvantages of using the labour force survey to measure unemployment?
- expensive
- time consuming
- only updated annually
- not entirely representative of the entire population as you can’t sample the whole population
Why is unemployment an issue?
- restricts the output and income an economy can produce: leads to less spending
- leads to unused capacity: makes the economy productively inefficient
- more unemployment benefits will be needed- costing the taxpayer more money
What are the four types of unemployment?
- frictional
- seasonal
- structural
- cyclical
What is frictional unemployment?
When people are in between jobs
What is seasonal unemployment?
When demand within certain industries spikes at different times of the year
What is structural unemployment?
When the skills demanded (within the economy) and skills available do not match
- when industries go into decline, the workers may not be able to find transferrable goals
What is cyclical unemployment?
When fluctuations in the economic cycle leads to periods of higher unemployment and periods of excess employment
- demand for labour is derived
What is derived demand?
The demand of a commodity, service etc that is the result of the demand of something else
What is a commodity?
A raw material e.g copper, wheat, cattle
Why does the government want to keep unemployment low?
- key macroeconomic objective
- the public assesses the government by levels of unemployment
- the benefit of high levels of employment has a positive effect on gdp (if there are more people producing, output will increase)
What are the 6 main policies that can combat unemployment?
- Expansionary demand-side policy
- Job training schemes
- Reforms to the tax and welfare system
- Reducing the geographical immobility
- Apprenticeship schemes
- Education
How can expansionary demand-side policies help reduce unemployment?
Will help reduce cyclical unemployment by causing an increase in aggregate demand e.g reduction in tax
How can job training schemes combat unemployment?
- tries to improve the skills of the current labour force so that over time they are more productive
- therefore they can produce more
- will reduce structural unemployment as people will be more employable
How can reforms to the tax and welfare systems help reduce unemployment?
- reducing taxes
- making claiming welfare benefits less attractive, people become incentivised to supply their labour
How can reducing geographical immobility help combat unemployment?
Policies that improve transport will help people get to work in further places and faster so more people will apply for more jobs
How can apprenticeship schemes help combat unemployment?
Provides a specific skill set in which people can specialise and hence market themselves
How can education help combat unemployment?
Leads to better educated people with more skills
- reforms to the education system
- making public money go further, building schools, higher teaching standards
