7) Unemployment 2 -MB Flashcards
(24 cards)
Define frictional unemployment
Unemployment associated with job search; that is, people who are between jobs
Define structural unemployment
Unemployment that arises because of changes in the patterns of economic activity within an economy
Define cyclical unemployment
Unemployment that arises during the downturn of the economic cycle, such as a recession
Define demand-deficient unemployment
Unemployment that arises because of a deficiency of aggregate demand in the economy, so that the equilibrium level of output is below full employment
Define seasonal unemployment
Unemployment that arises in the seasons of the year when demand is relatively low
Define real wage inflexibility
An argument that if real wages do not adjust downwards, the result would be persistent unemployment
Define voluntary unemployment
Situation arising when an individual chooses not to accept a job at the going wage rate
Define involuntary unemployment
Situation assisting when an individual who would like to accept a job at the going wage rate is unable to find employment
Why is there always frictional employment?
- Because information isn’t perfect and it takes time to find work
- Unemployment at full employment is almost all frictional in nature
Why does structural unemployment occur?
Due to a mismatch of skills in the Labour market
What 4 things can structural employment be caused by?
1) occupational immobility
2) geographical immobility
3) technological change and the development of labour saving technology
4) structural change in the economy
What is occupational immobility?
The difficulties in learning new skills
What is geographical immobility?
The difficulty in moving regions to get a job
What is an example of structural change in the economy?
Eg the decline of the coal mines due to a lack of competitiveness meant that navy coal miners were unemployed
What falls under the category of demand deficient unemployment?
Cyclical employment
When does demand deficient unemployment occur?
When the economy is below full capacity, eg in a recession aggregate demand will fall leading to a decline in output and negative economic growth
What will demand deficient unemployment result in?
A fall in output, firms will employ fewer workers because they are producing fewer goods. Also, some firms will go out of business leading to large scale redundancies
When does demand deficient unemployment occur?
In recessions, unemployment tends to rise rapidly as firms lay off workers
What are examples of seasonal employment?
(Demand for Labour varies in jobs that are linked to seasonal weather), tourism and farming both require extra workers at certain times of a year
When does wage inflexibility occur?
This occurs when wages in a competitive labour market are pushed above the equilibrium
What is an example of wage inflexibility occurring?
Wages could be pushed above the equilibrium level by minimum wages or trade unions. This is sometimes known as “disequilibrium” unemployment
What is sometimes known as “disequilibrium” unemployment?
When wages could be pushed above the equilibrium level by minimum wages or trade unions
Why could voluntary unemployment occur?
Workers may make a rational choice to remain unemployed in the short term, to achieve a job with higher pay in the long term
Why can migration increase unemployment levels?
In 2022 the UK experienced net migration of 504,000, of migrants do not have skills for which there are shortages, this can increase unemployment levels
