Employment

Question 1

What are the governments employment aims?

Answer 1

Governments aim for full employment, which is where everybody of working age, who want to work can find employment at the current wage rates

Question 2

What does full employment not mean?

Answer 2

Everyone has a job

Question 3

Why does government want full employment?

Answer 3

Maximise production and raise standards of living in the country

Question 4

What happens if there is unemployment?

Answer 4

The economy won’t be operating at full capacity.

Question 5

What does underemployment mean?

Answer 5

• Economy is not operating at full capacity
• Underemployment is when someone has a job but it is not a job that utilises a person’s skills, experience or availability to the best effect.

Question 6

What happens when demand in an economy is low?

Answer 6

Unemployment will rise

Question 7

What is cyclical unemployment?

Answer 7

unemployment that happens when the economy is in a recession, when ad falls, employment will fall too, a country suffering from a negative output is likely to have cyclical unemployment too.

Question 8

What is seasonal unemployment?

Answer 8

unemployment that occurs because demand for labour in certain industries will not be the same all year round.

Question 9

What is a key feature of seasonal unemployment?

Answer 9

It tends to be regular and predictable, and only affects certain industries.

Question 10

What is a key feature of cyclical unemployment?

Answer 10

affects any industry.

Question 11

What is structural unemployment caused by?

Answer 11

• A decline in a certain industry or occupation and usually due to a change in customer preferences or technological advances, or the availability of cheaper alternatives.

Question 12

What is occupational mobility?

Answer 12

When some occupations decline over time, but the workers in these occupations do not possess the skills necessary to do the jobs that are available

Question 13

What is geographical immobility?

Answer 13

Workers are unable to leave a region which has high unemployment to go to another region where there are jobs, may be because they cannot afford to move, or for personal reasons such as family ties.

Question 14

How does structural employment affect the multiplier?

Answer 14

Regions affected by structural unemployment will have a negative multiplier effect, unemployment leads to less spending, causing more unemployment in the region.

Question 15

what is frictional unemployment?

Answer 15

Frictional unemployment is unemployment experienced by workers between leaving one job and starting another

Question 16

Why is frictional unemployment always present?

Answer 16

Because employees will always be changing jobs.

Question 17

What affects the length of frictional unemployment?

Answer 17

• In a boom the no. of vacancies tends to be much higher, so frictional unemployment is lower
• In a slump there is a shortage of jobs, so frictional unemployment is higher
• Generous welfare benefits give people less incentive to look for a new job, people can afford to take time looking, increasing period of unemployment
• Quality of information provided to people, if they do not have clear knowledge on the skills or existence of jobs they will have longer periods of unemployment
• Occupational and geographical labour immobility will affect the length of time between jobs

Question 18

What is real wage unemployment caused by?

Answer 18

Real wages being pushed above the equilibrium level of employment, caused by trade unions negotiating for higher wages, or by the introduction of a minimum wage.

Question 19

How does a national minimum wage affect unemployment?

Answer 19

Introduction of a NWM above the equilibrium wage rate would cause the supply of labour to increase, and demand to fall, causing unemployment due to excess supply.

Question 20

How is labour supply increased?

Answer 20

Migration of workers into a country.

Question 21

What are the consequences of unemployment?

Answer 21

• Unemployed have lower incomes, they will spend less and reduce firm’s profits
• Unemployment will mean less income tax revenue for government, and less consumer spending will reduce their indirect tax revenue, the government will also have to spend more on unemployment benefits.
• Reduced incomes will lower standards of living
• Workers with longer periods of unemployment can find their skills and training to become outdated reducing employ ability and making unemployment more likely