Week 3 - Unemployment & Savings Flashcards
Unemployment
people able, available, and willing to work at the going wage but cannot find a job despite an active search for work
Employed
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
Economically inactive
people of working age (16-64) are not involved in the labour market – they are neither working nor actively seeking employment
Discouraged workers
workers who have stopped looking for work because they found no suitable employment options or failed to be shortlisted when applying for a job
Labour force
all people who are of working age, and able and willing to work
Labour force formula
Total number of workers = number of employed + number of unemployed
Unemployment rate
measures the percentage of workers in the labour force who do not currently have a job but are actively looking for work
Unemployment rate formula
Unemployment rate = (Number of unemployed / Labour force) x 100
Labour-force participation rate
the percentage of the working-age population that is currently employed or actively seeking employment
Labour-force participation rate formula
Labour-force participation rate = (Labour force / Adult population) x 100
What are the ways in which unemployment is measured?
Claimant count
Labour Force Survey
The Claimant Count
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
Labour Force Survey
a survey that asks 60,000 people whether they are unemployed and whether they are looking for a job.
Natural rate of unemployment
the unemployment rate that persists in a well-functioning, healthy economy that is at “full employment”
What are the two main components of the natural rate of unemployment?
- 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.
- Frictional unemployment – people who are classed as unemployed while they are moving between jobs
What policies could be undertaken to eliminate the structural component of the natural rate of unemployment?
- Retrain people with. ‘unwanted’ skills
- Public training programmes
- Apprentice schemes
What policies could be undertaken to eliminate the frictinal component of the natural rate of unemployment?
- Reduce time for unemployed to find jobs
- Government programmes to facilitate job search
- Government-run employment agencies
- Lower/shorten the duration of unemployment insurance
Minimum wage
the legally required minimum amount of pay that employer must pay their employees
Trade unions
organisations of workers that seek through collective bargaining with employers to protect and improve the real incomes of their members, provide job security
Arguements FOR trade unions
Improved pay
Better working conditions
Greater fairness in the workplace, keeping a productive workforce
Arguements AGAINST trade unions
Membership costs
Disruptions due to strikes
Protecting underperforming employees
Efficiency wages
employers paying higher than the minimum wage to retain skilled workers, increase productivity, or ensure loyalty
What do efficiency wages lead to?
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.
Crowding out
an economic theory that argues that rising public sector spending drives down or even eliminates private sector spending (negative effect on private investment)
