Unemployment Flashcards
(12 cards)
Define unemployment
Those of working age, who are willing and able to work, and actively seeking it but don’t have a job.
Define Cyclical unemployment
The component of overall U that results directly from cycles of economic upturn and downturn
Define Structural unemployment
The result of LR shifts in an economy which create a mismatch between what companies demand and the skills workers are able to supply.
Define Frictional unemployment
Occurs from inevitable time delays in finding new employment in a free market.
What are 2 measures of unemployment?
Labour Force Survey
- 40,000 HH
- Measures number of employed and inactive.
Claimant Count: a measure of the number of people claiming benefits principally for the reason of being employed.
Define real wage unemployment
Real wage unemployment occurs when wages are set above the equilibrium level causing the supply of labour to be greater than demand.
Name 3 causes of Real wage unemployment
- Powerful TUs which bargain for wages above the equilibrium
- Minimum wages
- Deflation and sticky wages.
Name 4 Supply side policies to reduce the Natural rate of unemployment
- Education and training to solve occupational immobility
- Geographical subsidies to help workers and firms move
- Remove labour market regulations - to increase flexibility
Employment subsidies to encourage firms to take on the
long-term unemployed - Lower min wage/reduce power trade unions - to reduce
real wage unemployment
Define Natural rate of unemployment
The rate of unemployment when the labour market is in equilibrium. It is caused by structural (supply-side) factors e.g. mismatched skills.
Name Demand side policies to reduce unemployment
Expansionary Monetary policy
- Decreasing I.R → boost AD
- Depreciation of E.R → boost D for X
Expansionary Fiscal policy
- T cuts
- Increased G → boost AD
Effects of unemployment on individuals
- Loss of Y and living standards
- Loss of skills and worsening employment prospects
- Unemployment Trap - welfare payments create moral hazard.
- Reduced health → more likely to remain unemployed.
Effects of unemployment on the economy
- Opportunity cost - the lost output that could have been produced if they were working.
- Waste of resources - scarce resources used for education waste if people aren’t working.
- Loss of government revenue
- Additional G - either through T or gov borrowing.
