Unemployment - Unit 2 Flashcards
What is unemployment?
A measure of those who are able, willing and available to work, at the going work rate, but are unable to find work
What are two methods of calculating unemployment?
A claimant count or a labour force survey.
How does a claimant count work?
It measure all those claiming unemployment benefits (job seekers allowance) as a percentage of the population ( may contain some who are not genuinely searching for a job; and excludes people entitled to claiming the benefit)
How does the labour force survey work?
Measures those who say they don’t have work, but want it (will include those not entitled to claim benefits and thus will be higher.
What is the however of claimant counts and labour force survey?
They ignore hidden unemployment e.g. part timers who want full time work, students who would rather work.
What are 6 types of unemployment?
Cyclical, seasonal, frictional, structural, regional and voluntary
Cyclical unemployment is:
Caused by a lack of demand in the economy - usually occurs during a downturn or recession
Seasonal unemployment is:
Caused by seasonal workers not being employed at other times of the year e.g. tourism
Frictional unemployment is:
Workers moving between jobs - time lags between
Structural unemployment is:
Caused by long term changes in the structure of industries when some industries go into decline - workers are usually occupationally immobile
Voluntary unemployment is:
Caused by people choosing not to work - low incentive to work
Regional unemployment is:
A form of structural unemployment with a decline in industry concentrated in a certain area
Costs of unemployment for the unemployed:
Lower living standards, loss of earnings and loss of skills
Costs to the employed:
Lower standard of living due to taxation, less expenditure on NHS and schooling
Costs to the economy:
Slower economic growth and slower rises in standard of living
Causes of unemployment:
Demand side and supply side
Demand side causes -
Cyclical unemployment due to a lack of AD in the economy. Lower AD leads to firms cutting costs - redundancy
Supply side causes -
Structural unemployment if a worker is unable to do a certain job, or voluntary unemployment if taxation is too high or wages too low
Demand side solutions -
Cut interest rates/income tax - both increase AD which in turn should increase employment and output problem - demand pull inflation - imports rise
Supply side solutions -
To tackle structural unemployment- increase education and training
To tackle voluntary unemployment, increase minimum wage and cut income tax - however may be slow to introduce and not specific enough training
