LS9 - Employment Flashcards
Frictional employment
Short term unemployment caused by workers leaving one job for another
Seasonal unemployment
Some workers tend to work on a seasonal basis - unemployment levels fluctuate between seasons - ex: workers in the tourism industry will mostly only be working in certain seasons
Structural unemployment
Occurs when the demand for labour is less than its supply in a certain labour market
Regional unemployment - difference in factors of production between regions lead to differences in employment
Sectoral unemployment - if the market for labour in a particular sector declines, workers in that sector will lose their jobs, leading to unemployment, and this is made worse if those workers dont have any other valuable skills that could be used in a different sector
Technological unemployment - some employees could be replaced by technlogy, increasing unemployment
Cyclical unemployment
Unemployment that occurs when there is a recession - insufficient AD in the economy for everyone to have a job
Real wage unemployment
Some unemployed people might be willing to work for less than minimum wage, but firms arent allowed to pay workers less than min wage, so they will remian unemployed
Others wont look for a job, as they could receive more from unemployment benefits than from an actual job
Significance of increase in employment rate
Increased GDP - higher employment, higher output
Increased revenue, profits, incomes, standard of living
Higher gov taxation
Significance of decrease in unemployment rate
Falling gov spending on out of work benefits
Increased employment, people out of job market for too long become increasingly unemployable
Job market less flexible with workers for employers to choose from
Costs of unemployment
INCREASED SPENDING ON BENEFITS-
unemployment rises, government has to spend more on unemployment related benefits. Reduces spending on other essential services such as education and health or will have to raise its borrowing or tax rates. This means money spent on benefits will have opportunity cost.
LOST TAX REVENUE- more people in work, incomes, spending and profits will be higher. This means government would collect more tax revenue from all forms of taxes and this revenue could be spent on education, health and transport which improves quality of peoples lives and increase country’s productive capacity
HYSTERISIS- The longer people are out of work, the more difficult it is for them to get employed, which, if long term enough, can reduce the productive capacity of the economy. Employers are less reluctant to hire someone who has been out of work for a long time because:
1. Being out of a job that long may suggest that they are not good workers
2. The longer someone is unemployed, the more their skills deteriorate and the more out of
touch they become with advances in working methods and technolog
On the supply side, the long term unemployed tend to seek work less actively over time because:
1. They may lose their work ethic and get used to being at home
2. They may become discouraged by the continuous rejections
Benefits of unemployment
Firms benefit from greater choice- more unemployment, more choice of good workers to choose from, good for long term profitability
Workers have time to search for the best job
Significance of migration for employment and unemployment
Migration is movement of people from one country to another.
If immigrants come to a country to fill vacancies then immigration leads to an increase in employment
However if immigrants are looking for work and either dont find it or displace other people from work then employment may not change and unemployment might increase
If immigrants come to a country to earn money to send home to their families this affects current account of balance of payments in short run.
