Unemployment

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Define unemployment
People of working age, without a job, but who are actively seeking work at current wage rate
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Define underemployment
State of people of working age who are not working at their full potential due to reduced hours or employment opportunities
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Define level of unemployment
Number of people unemployed at a point in time
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Define natural rate of unemployment
The amount of people voluntarily unemployed. The difference between those who will work at real wage and those that won't
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What helps to reduce the natural rate of unemployment?
Supply side policies
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What are the 2 measures of unemployment?
Claimant count, ILO (international labour organisation) measure
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What is the claimant count?
It measures only those claiming unemployment related benefits: mainly Job Seekers Allowance
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Positives of the Claimant Count
Captures people who are actively seeking work, published monthly, quick to calculate and reasonably accurate - can see who doesn't have a job
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Negatives of the Claimant Count
Fraud, doesn't measure people who aren't claiming job seekers allowance, government can manipulate to improve figures and not internationally comparable
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What is the ILO measure?
Count taken by survey of employment 4 times a year. Regulations have to be: unemployed if without paid job, available to start work within 2 weeks, have looked for work within last 4 weeks
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Positives of ILO measure
Counts people not on job seekers allowance, internationally comparable, independent of government and cannot be manipulated
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Negatives of ILO measure
Not very accurate because of surgery, not sent to many people, difficult to prove and expensive and time consuming
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What do neither the ILO measure or Claimant Count address?
The hidden unemployment - underestimation of unemployment, equalise full and part time employment, underemployment, black economy and economically inactive
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What are the 5 types of unemployment?
Cyclical/demand deficient, Real wage/classical, Structural, Frictional and Seasonal
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Define structural unemployment
Demand for labour does not equal supply for labour in a labour market due to changes in the structure of the economy
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Causes of structural unemployment
Geographical immobilities and occupational immobilities
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Causes of demand deficient unemployment
Wages are sticky and cost of reducing wages outweighs loss of employees
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Define frictional unemployment
It is temporary and a natural result of movement in the labour market
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Define seasonal unemployment
Demand for labour is mainly seasonal or temporary. Seasonal unemployment tends to rise in winter and fall in summer
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Which types of unemployment are voluntary?
Frictional, structural, real wage and seasonal
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Which types of unemployment are involuntary?
Demand deficient/cyclical
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Solutions to Cyclical/Demand deficient unemployment
Increase Government spending to boost AD as direct impact, Lower taxation (income and corporate), reduction in interest rates
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Solutions to Real wage/Classical unemployment
Reduce power of trade unions, reduce minimum wage, weaken employment protection laws
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Solutions to Structural unemployment
Reduce state benefits to the unemployed, offer help with living costs in vacancy areas, Government locates own admin to high areas of unemployment blackspots
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Solutions to Frictional unemployment
Increase the flow of information by giving access to national vacancies at Job Centres, reduce the amount of unemployment benefit after 3 months
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Solutions to Seasonal unemployment
Increase the amount of temporary vacancies and part-time work available, provide assistance with transport to high vacancy areas, encourage diversity amongst seasonal focussed businesses
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What is the unemployment rate equation?
number of people unemployed/number of people in labour force x 100
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UK unemployment rate 2018
4.1%
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Other cards in this set

Card 2

Front

Define underemployment

Back

State of people of working age who are not working at their full potential due to reduced hours or employment opportunities

Card 3

Front

Define level of unemployment

Back

Preview of the front of card 3

Card 4

Front

Define natural rate of unemployment

Back

Preview of the front of card 4

Card 5

Front

What helps to reduce the natural rate of unemployment?

Back

Preview of the front of card 5
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