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25 Cards in this Set
- Front
- Back
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Two ways of defining unemployment |
1. number of people who are looking for a job but can't find one 2. number of people unemployed as a percentage of the labour force |
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2 Ways of measuring unemployment |
1. The Claimant Count 2. The Labour Force Survey |
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The claimant count |
- number of people claiming unemployment benefits from the government |
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The claimant count advantages
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- data is easy to obtain - no cost to collect the data - updated monthly, meaning it is current |
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The claimant count disadvantages
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- can be manipulated by the government to make it seem smaller - it excludes people who are looking for work but are not eligible to claim job seekers allowence |
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The Labour Force Survey |
- asking a sample who aren't working if they're actively seeking work and add those who answer less to produce the ILO (international labour organisation) unemployment count |
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The Labour Force Survey advantages
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- more accurate than the claimant count - internationally agreed measure for unemployment (easier to make comparisons) - takes into account underemployment |
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The Labour Force Survey disadvantages
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- less up to date due to the way it is collected - expensive to collect and put together - sample may be unrepresentative of the population as a whole, making the data inaccurate |
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Costs of unemployment to the economy |
- high unemployment suggests an economy is doing badly - means that there is unused labour in the economy, so fewer goods and services can be produced - lower incomes and less spending, impacting business sales |
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Costs of unemployment |
1. unemployed will have lower incomes, reducing firm's profits 2. Less income tax revenue for governments 3. More spend by the government on unemployment benefits 4. Areas with high unemployment can have high crime rates and health problems 5. Workers who are unemployed for long periods of time may find their skills become outdated |
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Types of unemployment |
1. Demand deficit (cyclical)- DEMAND side 2. Real wage - SUPPLY side 3. Frictional- SUPPLY side 4. Structural- SUPPLY side 5. Seasonal- SUPPLY side |
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1. Demand deficient explaination |
- also called cyclical - Keynesian - caused by a demand shock = AD decrease - during the recession phase of the economic cycle (2008-2012) |
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1. Demand deficient solutions
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expansionary demand side policy - fiscal (spending increase, taxes decrease, deficit increase) - monetary (supply increase, spending decrease) -multiplier effect will increase |
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2. Real wage explaination |
- classical - demand shock = AD decrease = sales decrease = real wages increase = unemployment increase = real wages should decrease (but may not) |
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2. Real wage solutions |
make labour markets more flexible - abolish minimum wages - reduce welfare - trade union bashing |
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3. Frictional explaination |
- also known as search unemployment - normal level of unemployment expected in an economy - moving from one job to the next with a gap in between - voluntary unemployment due to wanting to change jobs |
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3. Frictional solutions |
- provide better information - may be a bigger frictional element due to higher voluntary unemployment (solution to this is to reduce welfare) - increase minimum wage and other in work benefits - decrease direct taxes and other unemployment benefits |
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4. Structural explaination |
- wrong skills or location (factor immobility) - a factor of production is immobile if it can't move from one industry to another e.g. a factor designed for one use isn't very good for another thing - problem in the UK in 1980s (mining decline) |
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4. Structural solution |
- problem with increasing AD is that it would only lead to inflation - increasing real wages wouldn't help as people would't be correctly skilled for the job - training should be provided in rising industries - government could move the workers to the work or the work to the unemployed |
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5. Seasonal explaination |
- employment in the run up to Christmas and summer |
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5. Seasonal solution |
seasonally adjusted - seasonal jobs aren't considered in the claimant count |
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Impact of unemployment on consumers |
- lost income - impact on self esteem and confidence - more stress on relationships and families - crime rates rise in recessions and fall in booms - loss of skills when unemployed |
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Impact of unemployment on firms
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- easier to recruit better staff - lower wages to pay = lower costs - AD will decrease so there will be less sales |
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Impact of unemployment on the government
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- fiscal deficit will increase - increased spending on unemployment - reductions in tax revenues |
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Impact of unemployment on society |
- opportunity cost - goods and services that the unemployed could be making |
