2.1.3 Employment and Unemployment

a) Measures of Unemployment

Claimant Count

The claimant count is a measure of unemployment based on the number of people who are claiming unemployment-related benefits, such as Jobseeker's Allowance.

It provides a narrow definition of unemployment, as it only includes those actively seeking and receiving government benefits.

International Labour Organisation (ILO)

The ILO defines unemployment as individuals of working age who are without work, actively seeking work, and available for work.

The UK Labour Force Survey

The UK Labor Force Survey is the primary source of unemployment data in the UK and follows the ILO definition.

It provides a broader and more comprehensive picture of unemployment, including those not eligible for benefits.

b) Distinction between Unemployment and Under-Employment

Unemployment

refers to individuals who are not currently employed but are actively seeking and available for work.

Under-employment

occurs when individuals are employed but their job does not fully utilize their skills and qualifications. This can result in part-time work, low wages, or jobs below their skill level.

c) Significance of Changes in Employment, Unemployment, and Inactivity

Employment Rate

Measures the proportion of the working-age population in employment. A rising employment rate indicates economic growth.

Unemployment Rate

Measures the proportion of the labor force actively seeking work. A high unemployment rate indicates economic problems.

Inactivity Rate

Measures the proportion of the working-age population that is not in the labor force. It can indicate a lack of job opportunities or demographic factors.

d) Causes of Unemployment

Structural Unemployment

Occurs when there is a mismatch between the skills of the workforce and the requirements of available jobs.

Frictional Unemployment

Temporary unemployment when individuals are between jobs or entering the workforce.

Seasonal Unemployment

Linked to seasonal variations in demand, e.g., tourism or agriculture.

Demand Deficiency (Cyclical) Unemployment

Arises from a lack of aggregate demand during economic downturns.

Real Wage Inflexibility

When wages are too high, leading to job cuts or an unwillingness to hire.

e) Significance of Migration and Skills for Employment and Unemployment

Migration can impact employment by changing the supply of labor in specific regions. Immigrants may fill labor gaps, but this can also lead to wage pressures.

Skills are crucial for employment. A highly skilled workforce is more adaptable and less prone to unemployment in a changing economy.

f) Effects of Unemployment

Consumers:

Reduced income can lead to lower consumer spending, impacting businesses

Firms:

High unemployment can lead to a larger labor pool, potentially reducing wage pressures.

Workers:

Lost income, reduced job prospects, and psychological stress.

Government:

Increased spending on unemployment benefits and lost tax revenue, social issues.

Society:

Social unrest, reduced well-being, and inequality.