1.3 Employment/ Unemployment

Question 1

Measures of unemployment?

Answer 1

1) Labour Force Survey
- Asks 70,000 households to self-classify
2) Claimant Count
- Measures recipients of Universal Credit + Jobseeker’s Allowance

Question 2

Advantages of LFS?

Answer 2

• Comparisons between countries
• Comparison over time

Question 3

Disadvantages of LFS?

Answer 3

• Small pool
• Costly and time-consuming

Question 4

Advantages of CC?

Answer 4

• Inexpensive
• Monthly

Question 5

Disadvantages of CC?

Answer 5

• Unemployed who don’t receive benefits
• Weak with underemployment

Question 6

What is underemployment?

Answer 6

Workers under-utilised within their jobs

Question 7

Causes of unemployment?

Answer 7

1) Cyclical - Caused by low AD
2) Frictional - Between jobs (reduced by info)
3) Structural - lack of suitable skills
4) Seasonal - different seasonal demands

Question 8

What is the Unemployment Trap?

Answer 8

Loss of welfare benefits and paying tax if started work

Question 9

What is economic inactivity?

Answer 9

People of working age not looking for a job

Question 10

Negative impacts?

Answer 10

• Slow GDP growth
• Rising income inequality
• Lower tax revenues + higher welfare spending

Question 11

Policies to reduce unemployment?

Answer 11

• Lower interest rates
• Depreciation
• Higher investment
• Lower business taxes

Question 12

Benefits of falling unemployment?

Answer 12

• Increased GDP growth
• Higher tax revenue

Question 13

Disadvantages from falling unemployment?

Answer 13

• Inflation
• Low savings