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Employment and unemployment (Cause of unemployment (Causes for demand…
Employment and unemployment
Level of employment is the number of people in work, whereas the rate of employment is the proportion of people in work relative to the size of the workforce
The work force consists of those people who are at work or those of working age who are willing and able to work
The unemployed are people who are willing and available to work but are not currently employed
The level of unemployment is the number of people out of work and the rate of unemployment gives the figure as a proportion of the workforce
Measure of unemployment
Claimant count
is a measure of unemployment that records the number of people who are claiming JSA or other benefits. To be eligible you must have not been working for 6 months. This does not represent the full picture of unemployment, but it s quick and cheap to recieve
ILO
, this is the labour force survey which is a now a official measure in the UK. This is a long process as it will take up to 6 weeks, and it may also be inaccurate as the research takes place with 80,000 which is completed by the household residents themselves
The distinction between unemployment and underemployment
Many people have work but feel that they are not working enough hours or that their qualification is not suited to their job. This is underemployment which was very high during the 2008 crisis
Factors that change unemployment
School leaving age
, this is now 18 years old, which will have an effect on making the workforce smaller because anyone in education or training is not counted as economically active and the in the long term it will make school leavers more employable
Number of school leavers entering higher education
over 40% of 18 year old people carry on with education this may fall with the rise in education fees and rising popularity in apprenticeships
Level of net migration
net migration is the difference between those coming into the country and those leaving. 37% migrate to the UK to study and 34% is to work
Availability of jobs
, there is likely to be higher levels of employment if there are more jobs available
Level of tax and benefits
If taxes on income are high or out-of-work benefits are generous, there is a disincentive for people to work
Inactivity
This is when people are of working age but not working. They will be of working age but not willing to work. Most of the inactive are made up of students.
The problem with inactivity is that it makes employment look lower than it actually is
Cause of unemployment
Classical view
which is that there is only unemployment when people are not willing or able to work at the give wage rate. Unemployment is a short term problem and should only be left to laissez faire. If people accept lower paid jobs they will be employed, for this reason it is called real wage unemployment
Keynesian view
is that unemployment can happen in the long run as there is insufficient AD in the economy. If you agree that the economy can be in equilibrium but not everyone has a job you are arguing that there is demand-deficient unemployment. Spending less means fewer job opportunities in the economy meaning wages are cut or the people are made unemployed h
Causes for demand deficient unemployment
Lack of business confidence
increase in the value of the currency
slow rates of productivity growth relative to other countries
external shocks such as oil prices which is imported in the UK
increase use of imports from low wage economies
Structural unemployment
Frictional unemployment
Seasonal unemployment
Significance of migration on unemployment and skills for employment
This will depend on the reasons for immigration
If a person comes to fill vaccines they will be improving employment
If they come with the intention to find a job this will increase unemployment levels
Effects of unemployment
The cost to consumers
, people with lower incomes and living standards will fall. As well as that people out of work lose moral and there are repercussions on family members
The cost to firms
firms will find that people spend less so they will have to prices and make less profit. But it may mean that people are more willing to stay in their jobs owing to fear of unemployment, so they will be willing to work harder
The cost to workers
workers without work may find that their skills become out of date
The cost to the government
As unemployment rises, the government has to pay more into job seeker's and will receive less tax income revenue
The cost to society as a whole
unemployed resources represent an opportunity cost. The economy could produce more without anything being given up. There will also be an improvement in living standards