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Flashcards in Employment Deck (14)
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1
Q

Unemployment definition:

A

“The number of people of working age (16 - retirement) who are able and available (not ill or in FT education) for the current wage rate but who do not have a job”

2
Q

What is the claimant count?

A

= No. of people claiming unemployment benefits from gov’t

  • The employed + the claimant count = total labour force
  • Easy to get data on but gov’t has specific rules which decide who can claim benefit, those excluded include: over 55’s, those who chose to leave workforce but now want to rejoin, those looking for PT work etc.
3
Q

What are Labour Force surveys?

A

= The use of surveys based on an accepted definition of unemployment
- Carried out by the gov’t quarterly throughout Europe

4
Q

LF participation rate =

A

(Labour force/Adult population) x 100

5
Q

Define the natural rate of unemployment

A

= The normal rate of unemployment around which the unemployment rate fluctuates
- Deviation from this is cyclical unemployment (due to a downturn in the business cycle)

6
Q

Define frictional unemployment

A

= Unemployment resulting from the time it takes workers to search for suitable jobs

  • The result of changes in the demand for labour from different firms or industries/regions (sectoral shifts)
  • Workers may also be looking for a job which is a better fit for them.
7
Q

Define structural unemployment

A

= Insufficient amount of jobs available
- Wages are set above the level which brings S+D into equilibrium this is due to min wage laws, unions and efficiency wages.

8
Q

What is national insurance?

A

= Benefits paid to the unemployed whose previous employer no longer needed their skills
- Unintentionally increases frictional employment as workers have less incentive to find a new job and are less likely to negotiate for job security

9
Q

The economics of unions?

A

= A type of cartel (sellers working together to increase their market influence)

  • Collective bargaining is the process by which unions and firms agree on the terms of employment
  • Unions ask for higher wages, better benefits and working conditions than the firm would offer in its absence then use techniques such as work to rule nd a strike to ensure they comply
10
Q

What are the effects of unions?

A
  • When a union causes wages to increase above equilibrium level the supply of labour increases but the demand decreases
  • Workers who remain employed are better off (insiders)
  • But those now unemployed (outsiders) can either wait for another chance to earn a high union wage or just take jobs in firms which aren’t unionized
11
Q

Are unions good or bad for the economy?

A

Bad
- Reduce Q of labour demanded and reduce wages in the rest of the economy
- High union wages increase unemployment to less than the efficient competitive level
- Some workers benefit at the expense of others
Good
- Reduce market power of firms who could have otherwise offered low wages/poor working conditions
- Represent workers views to promote a happy and productive workforce

12
Q

Elements of the theory of efficiency wages

A
  • Improved worker health
  • Decreased turnover
  • Workers put in more effort as they are more eager to keep their jobs (Marx “reserve army of unemployed”)
  • Higher wages attract a better pool of workers to apply
13
Q

The cost of unemployment to the individual

A
  • Loss of earnings
  • Stress, self-esteem and health problems
  • Drug and alcohol abuse due to social exclusion (10%)
  • Family breakdown
  • De-skilling
14
Q

The cost of unemployment to society

A
  • Opportunity cost (not maximising PPF, inefficient use of resources)
  • Less people paying taxes, more people needing benefits = budget deficit = stagnant economy due to increased savings
  • Firms with high elasticity of demand may be forced to let go of workers
  • If there are concentrated pockets of unemployment it can be difficult to recover from the cycle of economic decline