3.2 - LOW UNEMPLOYMENT

OCR

What is the definition of emplyment?

The use of labour in the economy to produce goods and services

What is the defenition of unemployment?

When workers able and willing to work at the current wage rates are unable to find employment

How is unemployment measured?

Claimant Count

What is the claimant count?

Method of measuring unemployment according to those claiming unemployment related benefits.

What is the equation for unemployment rate?

(Number of unemployed/Workforce) x 100

What is the defintion of the "level of unemployment"?

The number of people in the working population who are unemployed

What is the definition of the "rate of unemployment"?

The percentage of the country's workforce that is currently unemployed

What are the 4 types of unemployment?

frictional, structural, cyclical, seasonal

What is seasonal unemployment?

Unemployment caused by a fall in demand during a particular season

What is frictional unemployment?

Unemployment caused by time lags when workers move between jobs

What is structural unemployment?

Unemployment caused by a permanent decline of an industry or industries

What is is cyclical unemployment?

Unemployment caused by a lack of demand in the economy

Give an example of a cause for seasonal unemployment?

Seaside hotels close for the winter period

Give an example of a cause for frictional unemployment?

A national chain of shops closes down. The unemployed workers will be able to find work elsewhere such as other shops, but it takes time for them to do so

Give an example of a cause for structural unemployment?

A steelworks closes down. The workers have specific skills which are not required in other industries so they find it very difficult to gain employment elsewhere.

Give an example of a cause for cyclical unemployment?

The economy enters a period of lower economic growth, or even a period of negative economic growth, known as a recession. Totaol demand for goods and services falls, so fewer workers are required to produce output, leading to cyclical unemployment

Give three benefits for unemployment?

1. Over time, the demand for some products will fall and so fewer workers will be needed to produce them. On the other hand, the demand for other products rises and the economy will need workers to be available to move into these expanding sectors. These available workers are the frictionally unemployed. Each worker is unemployed only for a short period of time as there are time lags between finishing one job and starting another. Some frictional unemployment may be neccessary while the change in production takes place.

2. If there is a lot of unemployment, this keeps wage rates down. This may be negative to workers, but is seen as a benefit for firms. As the unemployed workers are competing for the jobs, the firms do not have to raise the wage rate in order to attract them.

3. As wage rates are kept down, this makes costs lower and firms are more competitive. This may help them to compete with firms in other countries. For example, if UK firms become more competitive, it can help their sales in both the UK and overseas markets.

Give three costs of unemployment to individuals?

1. Lower living standards due to the loss of wages. In the UK there is a system of state benefits that provides an income for the unemployed. However, this figure is very low and is much likely to be less than the previous wage.

2. The unemployed may suffer from a loss of status and self-esteem, which can lead to relationship breakdowns within families.

3. It is possible that some workers are unemployed for such a long time that they become unemployable. Employers are reluctant to give these people employment as they have no recent experience of work, so become excluded from the workforce.

Give three costs of unemployment to the government?

1. Labour recources are wasted. The economy is at full capacity when it is using all of its factors of production, so there are no idle recources. When labour is unemployed, this means that the economy could produce more goods and services than it is producing. This is known as being a waste of labour recources.

2. Unemployment leads to more unemployment (also known as cyclical unemployment). This can be a major problem for an economy and is associated with a recession. As total sepnding in the economy falls, the demand for workers falls and unemployment continues to rise. The government will have to introduce policies to try and break this.

3. It may cause a budget defecit which is a situation in which the government spends more than it recieves in tax revenue. Not only will the total tax on wages be lower (as fewer people are earning) but the government will have to pay more benefits for people who are bringing no money into the economy.

What is a cost of unemployment to the region?

Unemployment is often spread unevenly throughout the country: some areas tend to suffer much higher rates of unemployment than others. This "grouping" can cause the less employed areas to become "depressed areas" where unemployment is well above the national average and the lack of demand leads to more unemployment (cyclical unemployment). The situation may encourage people to move away from that area and it becomes even more "depressed". This could lead to homeowners finding the value of their property falls, and that there is a higher crime rate in these areas.