Week 3 - Unemployment & Savings

Question 1

Unemployment

Answer 1

people able, available, and willing to work at the going wage but cannot find a job despite an active search for work

Question 2

Employed

Answer 2

those who work for pay or profit for at least one hour a week, or who have a job but are temporarily not at work due to illness, leave or industrial action

Question 3

Economically inactive

Answer 3

people of working age (16-64) are not involved in the labour market – they are neither working nor actively seeking employment

Question 4

Discouraged workers

Answer 4

workers who have stopped looking for work because they found no suitable employment options or failed to be shortlisted when applying for a job

Question 5

Labour force

Answer 5

all people who are of working age, and able and willing to work

Question 6

Labour force formula

Answer 6

Total number of workers = number of employed + number of unemployed

Question 7

Unemployment rate

Answer 7

measures the percentage of workers in the labour force who do not currently have a job but are actively looking for work

Question 8

Unemployment rate formula

Answer 8

Unemployment rate = (Number of unemployed / Labour force) x 100

Question 9

Labour-force participation rate

Answer 9

the percentage of the working-age population that is currently employed or actively seeking employment

Question 10

Labour-force participation rate formula

Answer 10

Labour-force participation rate = (Labour force / Adult population) x 100

Question 11

What are the ways in which unemployment is measured?

Answer 11

Claimant count
Labour Force Survey

Question 12

The Claimant Count

Answer 12

A measure of unemployment, in which the number of people claiming unemployment benefits (Job Seeker’s Allowance (JSA)) is counted relative to the number of people paying income tax

Question 13

Labour Force Survey

Answer 13

a survey that asks 60,000 people whether they are unemployed and whether they are looking for a job.

Question 14

Natural rate of unemployment

Answer 14

the unemployment rate that persists in a well-functioning, healthy economy that is at “full employment”

Question 15

What are the two main components of the natural rate of unemployment?

Answer 15

1. Structural unemployment – when the labour market is unable to provide jobs to all individuals who are seeking employment due to a mismatch between the skills or qualifications of job seekers and the available job opportunities. This may be due to situations like deindustrialisation, leaving some unemployed workers unable to find work in new industries with different skill requirements.
2. Frictional unemployment – people who are classed as unemployed while they are moving between jobs

Question 16

What policies could be undertaken to eliminate the structural component of the natural rate of unemployment?

Answer 16

• Retrain people with. ‘unwanted’ skills
• Public training programmes
• Apprentice schemes

Question 17

What policies could be undertaken to eliminate the frictinal component of the natural rate of unemployment?

Answer 17

• Reduce time for unemployed to find jobs
• Government programmes to facilitate job search
• Government-run employment agencies
• Lower/shorten the duration of unemployment insurance

Question 18

Minimum wage

Answer 18

the legally required minimum amount of pay that employer must pay their employees

Question 19

Trade unions

Answer 19

organisations of workers that seek through collective bargaining with employers to protect and improve the real incomes of their members, provide job security

Question 20

Arguements FOR trade unions

Answer 20

Improved pay
Better working conditions
Greater fairness in the workplace, keeping a productive workforce

Question 21

Arguements AGAINST trade unions

Answer 21

Membership costs
Disruptions due to strikes
Protecting underperforming employees

Question 22

Efficiency wages

Answer 22

employers paying higher than the minimum wage to retain skilled workers, increase productivity, or ensure loyalty

Question 23

What do efficiency wages lead to?

Answer 23

Worker health
o Better paid workers eat a more nutritious diet; therefore, they are healthier and more productive. However, this mostly applies to developing countries rather than developed, as in developed countries the equilibrium wage for all workers ensures an adequate diet.

Worker turnover
o Forms can reduce turnover among its workers by paying them a high wage, which as a result helps a firm’s profits as hiring and training are costly

Worker quality
o Firms paying a higher wage attracts a better pool of workers, which consequently increases the quality of its workers

Worker effort
o Higher wages make workers more eager to keep their job, incentivising them to work harder and makes it more costly for them to quit. This is important when it is not easy to measure how hard an employee is working.

Question 24

Crowding out

Answer 24

an economic theory that argues that rising public sector spending drives down or even eliminates private sector spending (negative effect on private investment)