Macro- Unemployment

Question 1

Conditions to be described as unemployed

Answer 1

• of working age
• willing and able to work
• actively seeking job
• being wo a job

Question 2

How is unemployment measured

Answer 2

Labour force survey
Claimant count

Question 3

Describe labour force survey

Answer 3

Survey that questions households to workout the number of employed, unemployed and economically inactive to workout the unemployment rate

Question 4

Unemployment rate equation

Answer 4

Unemployed/ economically active (employed and unemployed) X100

Question 5

Describe claimant count

Answer 5

Amount of people claiming unemployment benefits

Question 6

Disadv of claimant count process

Answer 6

• hard to compare to other countries as some don’t have benefits system
• not everyone will claim benefits
• not everyone can claim benefits
  = spouse whose employed means you don’t get claims
• could be subject to fraud
  = using it as an excuse for money for gov

Question 7

Disadv of LFS

Answer 7

• sample size errors or +-3%
• small sample sizes due to expense of LFS
• discouraged workers wont seek work but still not seen as unemployed
• inactive groups like carers
• under employed eg part time workers
  = only need to work an hour a week to be employed
• disparities like age and gender related etc not taken into account

Question 8

Define seasonal unemployment

Answer 8

Seasonal workers might be without paid jobs due to the time of year when there are seasonal changes in demand, production and employment
Eg farming, tourism and tuition services

Question 9

Describe frictional unemployment

Answer 9

caused by workers seeking a better job or who are between jobs
- also affects people who are new entrants to the labour market like school leavers and uni graduates
- affects people who are on short-term employment contracts

Question 10

Reasons for high level of job vacancies in UK economy

Answer 10

• Brexit made it harder to recruit workers from the EU
  = causing shortages of workers in sectors, like hospitality, social care and construction
• Skills shortages like engineering and IT allied to relatively low pay in some industries
  = causing problems of recruitment & retention

Question 11

Describe structural unemployment

Answer 11

• Unemployment caused by lack of suitable skills for jobs available= result of de-industrialisation or other structural changes in an economy
• people stay unemployed because of disincentive effects from the tax & welfare system.

Question 12

Causes of structural unemployment

Answer 12

• new jobs need new skills
  = cost of re-training
• unaffordable housing
• erosion of skills from long term unemployment
• effect of welfare system on work incentives

Question 13

Describe cyclical unemployment

Answer 13

-it’s involuntary unemployment due to lack of aggregate demand for goods
= also known as Keynesian unemployment

Question 14

Describe real wage unemployment

Answer 14

• occurs when wages are above the equilibrium wage due to lower demand for workers
  Eg high minimum wages or powerful trade unions bargaining for wages above the equilibrium
  = can lead to a fall in aggregate demand

Question 15

Describe voluntary unemployment

Answer 15

• occurs when individuals choose not to work for various reasons, even though suitable job opportunities are available to them
  Reasons: People may be voluntarily unemployed for a range of personal reasons
  = eg taking a break to pursue education, raising children, pursuing early retirement, or taking time off for travel

Question 16

Describe involuntary unemployment

Answer 16

• occurs when individuals want to work and are actively seeking employment but are unable to find suitable job opportunities
• Reasons: Involuntary unemployment is typically the result of external factors beyond an individual’s control eg recession, job market conditions, lack of available jobs in a specific industry, or job loss due to company closures

Question 17

Describe nature of unemployment

Answer 17

The natural rate of unemployment represents the level of unemployment that exists in an economy when it is operating at full potential or in a state of long-term equilibrium

Question 18

Demand side- how gov can decrease unemployment

Answer 18

• Governments can increase spending (e.g. on infrastructure)
• Cut direct taxes= increase aggregate demand by stimulating economic growth
  Monetary policy:
• Central banks can lower interest rates = encourage consumers to spend more & save less, businesses to invest more = would boost aggregate demand & employment
• Lower interest rates= lead to a currency depreciation = lead to increased exports & boost aggregate demand

Question 19

Supply side- how gov can dear ease unemployment

Answer 19

• Gov can invest in education & training= improve skills of workforce= increase their productivity & improve occupational mobility
• Gov can encourage affordable housing rents & increase house building projects
• Reduce unemployment benefits & increase income tax free allowance= make it more attractive to be in work rather than receive benefits

Question 20

Causes of geographical immobility in the UK labour market

Answer 20

• Housing costs: Rents are high in many towns and cities often taking up a high percentage of disposable income
• Other living costs: cost of living varies from one area to another= includes costs of commuting, childcare expenses & food prices. A study by the Institute for Fiscal Studies found that the cost of moving to a new area can be up to £10,000
• Family and social ties: Workers may be reluctant to move away from families and friends. A study by the Joseph Rowntree Foundation found that only 1 in 5 unemployed people is willing to move to find a job

Question 21

Policies to improve geographical mobility in the UK labour market

Answer 21

• Rent controls to rental sector = improve rights of tenants including ban on no-fault evictions
• Increases in new house building with legal requirements for constructing affordable homes
• Infrastructure investment to expand the transport network + possible caps on fares

Question 22

Policies to help reduce long-term unemployment in the UK economy

Answer 22

• Encouraging employers to hire long-term unemployed people= can be done by providing incentives like reduced national insurance contributions for employers
• Investing in skills training= can help people to develop new skills that they need to get a job like training in coding financial support for job search

Question 23

Adv of unemployment for economy

Answer 23

• firms benefit from greater choice of employees
• workers have time to choose best job for them to increase productivity and happiness

Question 24

Costs of unemployment for economy

Answer 24

• lost output as each workers potential and productivity is lost
• deterioration of gov finances= increase gov spending on unemployment benefits, decrease tax revenue= decrease income tax and increase gov spending in areas of unemployment
• hysteresis= unemployment in LR where ppl get discouraged as not hired due to loss of skills, more competition= lead to drop out of labour force= wasted potential
• less trade in other countries
• socials costs like increase crime rate

Question 25

Costs of unemployment to individual

Answer 25

• loss of income
• loss of status and self worth
  = lead to depression and potential suicide