2.3.1 Employment & Unemployment **Not finished

Causes of unemployment

• Frictional 

• Seasonal

• Structural

  • Regional

  • Sectoral

  • Technological

• Demand efficiency (cyclical)

• Real wage inflexibility

Frictional unemployment

• Short-term unemployment due to not 100% efficient free market

• Eg. firms closing down factories/reducing number of workers

• Higher redundancy pay(pay after quitting in proportion to how long worked with company) = longer unemployed

Seasonal unemployment

• Jobs that depend on the season due to varying demand for labour

• Eg. tourism, agriculture

Structural unemployment

Regional:

• Certain regions suffer long-term unemployment due to shifting factors of production

• Eg. an area dedicated to mining raw materials put out of work once imports are cheaper

Sectoral:

• Sectors decline in importance, leaving workers who were valued and skilled before without jobs.

Technological:

• New technology puts groups of workers in an industry out of work (eg. self driving cars & drivers)

Demand deficiency/cyclical unemployment:

• Caused by movements in trade cycle

• Workers unemployed while economy is in recession/slump

Real wage inflexibility/unemployment

• Real wages (value of wage compared to minimum wage/unemployment benefits

• Minimum wage OR unemployment benefits being too high - companies can’t afford minimum wage and don't offer jobs OR better to accept benefits rather than work

Unemployment

• Number of people looking for a job but can’t find one at that point in time

Underemployment

• Workers can’t find jobs suitable for their skills or not enough hours to work

• Economy not making full use of resources

Labour force

Active population

• People within a certain age range that are willing and able to work

• (doesn’t include inactive/those unable to work")

• Employees, self-employed, underemployed and unemployed

Employed types

Employees: Work for another individual/firm

Self-employed: work for themselves

Types of unemployed

Short-term: less than a year

Long-term: more than a year

Hidden unemployed: Lose a job and don’t actively seek for a new one

employment rate

No, employed/population of working age

unemployment rate

no. unemployed/labour force(active population

activity rate

No. in work + no. unemployed/population of working age

inactivity rate

no. not in work + not unemployed/population of working age

Methods to reduce unemployment

• Increase quality and quantity of labour force

• Increase participation of certain age groups

Importance of net migration for employment

• Younger, more motivated immigrants

• Increase AD, firms expand and hire more workers

Importance of net migration for unemployment

• Labour supply increases, decreases wages'

• Local workers lose jobs as they struggle to compete with more skilled migrants

How to avoid problems of migration on unemploymet

• Make labour force more competititve globally (training + education)