Macroeconomics pack 2 page 37 onwards Flashcards
(44 cards)
Claimant Count Measure
The number of people claiming unemployment benefits
Claimants must be registered at the job centre, be over 18 (but not retired) and be actively seeking employment
ILO Measure
The number of people, aged 16-65, who have been out of work for 4 weeks and ready to start in 2 weeks. Based on the internationally recognised labour force survey
How is ILO measured
ILO survey (phone/ interview)
How is Claimant Count measured
Number claiming JSA
Problem with measuring ILO
- Sampling Issues: The ILO is only a sample of the population and this is therefore depend on the accuracy and reliability of the surveys
- Out of date: the ILO measure is 6 weeks - out of date when it is published
Problems with measuring claimant count
Too open to Government manipulation: In the 1980s and 1990s the Government introduced over 30 different changes, most of which reduced the unemployment figure
- Not internationally recognisable and therefore couldn’t be effectively used to make comparisons between countries
- People may be unemployed but don’t claim
Differences between CC and ILO measures
The claimant count may be lower than the ILO because they are deemed unemployed on the ILO measure but are are not claiming JSA
Why may the claimant count be lower than the ILO
- Youth unemployment is not included: workers who are youth unemployed between the ages 16 and 18 are employed on the ILO however they are not old enough to be eligible for the JSA.
- JSA may be harder to obtain eg. current Government have made it harder for people to claim JSA
- Workers do not claim benefits even when entitled as they may be happy to respond to the ILO but don’t want to claim JSA due to the stigma attached
Why may the claimant count be higher than the ILO
- The CC may include some people not included in the ILO measure as many claim benefits for being unemployed but actually be in work, usually as self-employed
Limitations of Unemployment measures
Unemployment measurers may underestimate unemployment as they exclude:
- Part time workers looking for full-time work
- People not actively seeking work or on benefits but would take a job if offered one
- Unemployed workers who have been taken off the unemployment register by moving them onto sickness and disability benefits
How may unemployment measures overestimate unemployment
Includes:
People who will never be able to get a job and are unemployable are still counted eg. ex criminals
Underemployment
Where an individual is employed in a second-choice occupation or is only working part time but would like to work full time
Causes of unemployment
- Structural unemployment
- Frictional unemployment
- Seasonal unemployment
- Cyclical unemployment
- Real wage unemployment
Structural unemployment
When the pattern of demand and production changes leaving workers unemployed, such as UK shipbuilding
Frictional unemployment
When workers are unemployed for short lengths of time, such as when searching for work
Short term cause of unemployment
How can governments reduce frictional unemployment
Governments need to fund and support job centres which provide information on job vacancies and support job searches
Also improving worker’s skills
Seasonal unemployment
When workers are unemployed at certain times of year, such as agriculture workers in winter
What can governments do to prevent seasonal unemployment
The provision of skills to allow worjers to gain jobs in the off-seasin wil hel and mean that unemployment wil vary less
Cyclical unemployment
When there is insufficient demand in the economy for all workers who wish to work at the current wage to get a job - caused by a fall in AD
How does AD cause cyclical unemployment
With lower GDP, firms will be producing less output and therefore less demand for workers. Eg in recessions there will be a rise in cyclical unemployment but this will fade during the recovery
How can governments reduce cyclical unemployment
Policy makers need to boost AD in the economy and reduce durations of falls in GDP. This could be achieved by reducing interest rates, increasing government spending or cutting taxation
Real wage unemployment
When workers are unemployed because real wages are too high and inflexible downwards, leading to insufficient demand for employers (also known as classical unemployment)
How can governments reduce real-wage unemployment
They could try to reduce power of trade unions or the minimum wage in order to reduce wage rates back to the market equilibrium
Could also reduce unemployment benefits to increase the incentive for low plaid workers to take low paid jobs
Relationship between levels of skills and employment
- The level of skill in the economy will impact on the levels of employment. When workers become unemployed, in order to gain a new job they need to have appropriate for the vacancies in the economy. If they don’t their will be high levels of occupational immobility and high levels of unemployment
- Lack of skills can lead to long term unemployment or structural unemployment, if there are no jobs in sectors where workers used to be employed
