Week 2: Unemployment Flashcards
What is the working-age population?
those aged 16+ who are not in the military or institutionalized
What does employed mean?
Working-age people who are working
What does unemployed mean?
Working-age people without jobs who are trying to get jobs
Who are the labour force?
The employed + the unemployed
What must you be, to be counted among the unemployed? (4)
part of the working-age population
not currently working
actively searching for work
able to accept a job if it were offered
What is the activity rate?
Employed + Unemployed / Working age population
What is the inactivity rate?
1 - (activity rate)
–> 1 - (Employed + Unemployed / Working age population)
What does a dynamic labour market make it easier for people to what?
find new jobs
Although most unemployment spells are short, when do they lengthen?
during deep recessions
Who is referred to as long-term unemployed?
People who have been unemployed for six consecutive months or longer
What makes it difficult for the long-term unemployed to find work?
discrimination and skill loss
Discriminated against potential employers, workers who have similar skills but a long spell of unemployment are less likely to be given an interview or hired
also, long-term unemployed may lose skills + connections the longer they’re out of work
Many workers in the UK are ‘underemployed’, what does this mean?
they would prefer to work more hours, or to take a new job with more hours
in recent years, the gap between unemployment and underemployment in the UK has increased
Why do unemployment rates NOT tell the whole story?
some people not in the labour force would work under the right conditions
many employed people are underemployed
What are most job seekers?
employed
they’re looking to move to another job
What are the 3 unemployment types?
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment
What is frictional unemployment?
Unemployment due to the time it takes for employers to search for workers and for workers to search for jobs
What are the causes of frictional unemployment?
the efficiency of matching firms with workers
skills mismatch
unemployment insurance (universal credit)
Why is the efficiency of matching firms with workers a cause of frictional unemployment?
because the costs of matching firms with workers is high, thus inefficient, thus there will be higher unemployment
Identifying good employment matches is difficult for both firms + workers
recruitment agencies, job posting and interviews are all costly for the firm
job search, networking and interviews are costly for workers
Why is skills mismatch a cause of frictional unemployment?
the changing mix of technology + market opportunities changes the skills required by firms
this can generate a mismatch between workers’ skills + the skills that a firm needs
mismatch increases unemployment
Why is unemployment insurance (universal credit) a cause of frictional employment?
When workers have more financial security, they can take longer to look for the RIGHT job, not the just the NEXT job
Unemployment insurance increases the opportunity cost of work
What is structural unemployment?
unemployment that occurs because wages don’t fall to bring labour demand & supply into equilibrium
What causes structural unemployment?
Efficiency Wages
(increasing wages to encourage greater productivity increases applicants / people who want to work there, motivates people already working there to keep working hard so they don’t lose jobs, but there isn’t enough jobs available to hire everyone)
Institutional causes:
Unions can keep wages high for some workers
Job protection regulations make it difficult to fire workers
Minimum wage laws
What is cyclical unemployment?
unemployment that is due to a temporary downturn in the economy
What are alternative measures of unemployment?
underemployed
marginally attached
involuntarily part time
