Employment and Unemployment

Question 1

Define unemployment

Answer 1

People who are willing to work, able to work and actively seeking work but currently don’t have a job

Question 2

Name and describe the 2 ways to measure unemployment

Answer 2

1.Claimant count
-measures the number of people receiving unemployment benefits

2. ILO (International Labour Organisation) Labour Force Survey
   -People of working age who have been unemployed in the last 4 weeks and are ready to work within the next 2 weeks

Question 3

Give reasons why there may be difference in the results of the 2 different measurements of employment

Answer 3

-Some unemployed people may not be eligible for benefits if their partner is working
-Some people might not want to claim benefits due to social stigma
-Claimant count doesn’t take into account the underemployed
- Unemployment benefits are harder to claim
-Some people may not be included in the LFS unemployment measure but would be
in the Claimant Count. These may include people working in the hidden economy or
those who fraudulently claim benefits.

Question 4

Define underemployment
(give examples)

Answer 4

Underemployment refers to a situation where individuals are employed but not fully utilised in terms of their skills, experience, or availability.

-Skills mismatch (under/over qualified)
-Part-time worker seeking full-time work
-Under-utilised hours

Question 5

Define the following terms:
1.Economically Active
2.Economically inactive
3.Employment Rate
4.Unemployment Rate
5.Participation Rate

Answer 5

1.Economically active:
Total number of employed and unemployed people

2.Economically inactive:
Not in employment, not able to work or actively seeking work

3.Employment Rate:
proportion of working age population that are in employment

4.Unemployment Rate:
Proportion of economically active population that are unemployed

5.Participation Rate:
Proportion of working age population that are economically active

Question 6

Define the 5 types of unemployment

Answer 6

1. Frictional unemployment:
   -when workers are unemployed when in between jobs (uni students who just graduated)
2. Seasonal unemployment:
   Occurs when certain industries or jobs are only available at specific times of the year.
3. Structural Unemployment:
   Occurs when there is a mismatch between the skills of workers and the jobs available in the economy, due to changes of structure in that industry
4. Cyclical Unemployment:
   -When AD decreases, there is a decrease in the derived demand for labour
5. Real-wage unemployment:
   When the wage rate is above the equilibrium wage rate, there is a surplus in supply so there’ll be unemployment as a result

Question 7

Effects of unemployment on the government

Answer 7

-Higher benefits spending
-fall in income tax revenue
-worsened budget deficit

Question 8

Effects of unemployment on consumers

Answer 8

-Stores may have to close down, leading to less variety and choice
- However, firms may lower prices and put on sales in order to increase demand for
their product.

Question 9

Effects of unemployment on workers

Answer 9

-Loss of skills
-Loss of income
-Lower morale/confidence
-Cope with the stigma of being unemployed

Question 10

Effects of unemployment on producers

Answer 10

-fall in profits (depending on XED of product)
-can offer lower wages
-increased recruitment pool