2.3 Employment

Question 1

What makes someone unemployed

Answer 1

Those who are able and willing to work, but are not employed

Question 2

What makes someone employed

Answer 2

Those that are with a job

Question 3

What is a governments aim towards employment

Answer 3

Governments aim to have as near to full employment as possible. They account for frictional unemployment by aiming for an unemployment rate of around 4%

Question 4

What are the two main measures of unemployment in the UK

Answer 4

The Claimant Count
UK Labour Force Survey (LFS)

Question 5

What is the claimant count

Answer 5

This counts the number of people claiming unemployment related benefits, such as job seeker’s allowance. They have to prove they are actively looking for work

Question 6

How can you evaluate the claimant count

Answer 6

Not every unemployed person is eligible or bothers claiming it, such as people with partners on high income wont be allowednto claim. There may also be instances of people claiming the benefit whilst they are employed. This method generally underestimated the level of unemployment

Question 7

What is the labour force survey

Answer 7

It directly asks people if they meet the following criteria:

1. Been out of work for 4 weeks
2. Able and willing to start work in 2 weeks
3. Workers should be available for 1 hour per week, part time unemployment included

Since the part time unemployed are less likely to claim unemployment benefits, this method gives a higher figure than the claimant count

Question 8

What are the types / causes of unemployment

Answer 8

Structural unemployment
Frictional unemployment
Seasonal unemployment
Demand deficiency (cyclical unemployment)
Real wage inflexibility

Question 9

What is sturcural unemployment

Answer 9

Occurs with a long term decline in demand for the goods and services in an industry where machines replace humans. If workers do not have transferrable skills they are likely to remain unemployed in the long run

Question 10

What is frictional unemployment

Answer 10

This is the tike between leaving a job and looking for another job. It is common to always have frictional unemployment and not damaging since is only temporary. This is why it is rare to get 100% employment

Question 11

What is seasonal unemployment

Answer 11

This occurs during certain points in the year. Demand increase for certain jobs from season to season

Question 12

What is demand deficiency unemployment

Answer 12

This is caused by a lack of demand for goods and services and it usually occurs during recessions. Firms are forced to close or make staff redundant because profitsnare falling

Question 13

What is real wage inflexability unemployment

Answer 13

Where wages above the market equilibrium cause unemployment. Cutting wages during times of weak consumer spending would lead to even lower economic growth

Question 14

What are the consequences of unemployment on consumers

Answer 14

If consumers are unemployed they have less disposable income and standards of living may fall.

Question 15

What are the consequences of unemployment on firms

Answer 15

Firms gain a larger supply of labour to enploy from. This causes wages to fall which helps reduce costs. Also if consumer spending falls firms may lose profits

Question 16

What are the consequences of unemployment on workers

Answer 16

With unemployment, there is waste of workers’ resources. They could also lose their existing skills if they are not fully utilised

Question 17

What are the consequences of unemployment on the government

Answer 17

They have to spend more on benefits which creates an opportunity cost as money could be invested elsewhere. They also receive less tax revenue since the unemployed have less disposable income

Question 18

What are the consequences of unemployment on society

Answer 18

Opportunity cost since workers could have produced goods and services if they were employed. Also could be negative externalities in crime

Question 19

What are the effects of full employment

Answer 19

It maximises the output of the economy

This can put pressure on price level leading to demand-pull inflation

Could also be wage inflation which pushes up price for production

Consumers and firms have more confidence in an economy where resources are used to full potential