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10- Employment and Unemployment - Coggle Diagram
10- Employment and Unemployment
Measuring Unemployment
Claimant Count
This uses the number of people on job seekers allowance to calculate unemployment
Advantages
Cheap
Quick
Not susceptible to survey errors
Disadvantages
Missing those ineligible for JSA and includes fraudsters
Diffucult to compare between other countries
Misses those who do not claim
Rate is always below LFS not everyone can or will claim
Under - Employment
Free Labour Force Survey
This is a survey conducted by ONS asking 40,000 households about thier jobs
Calculates Unemployment
(Unemployment / economically active) X 100
Advantages
Internationally Comparable
Includes those who are ineglible for JSA (Job Seekers Allowance)
Excludes Fraudsters
Disadvantages
Sampling Errors
Response Errors
Cost
HIdden Unemployment (Discourages Workers)
Under Employed (over Qualifed)
Inactive groups
Disparites ( Age / Gender / Race etc)
Involuntary and Volentary Unemployment
Unemployment
The unempolyed consists of those of working age (16-64) who are actively seeking work but who do not have a job
Involuntary Unemployment
Occurs when those who are able and willing to work at the going wage rate do not get work
Voluntary Unemployment
Refers to a situation when persons who are able to work but are not will to work although suitable work is not available to them.
Types of Unemployment
Seasonal
Definition
Unemployment caused by certain jobs being in high demand during different periods of the year
Examples
Farmers, Fruit Pickers or Santa's
Frictional
Definition
Also known as search unemployment that occurs when workers are “betweeb jobs”. Workers have the nescessary skills but need time to find the jobs
Examples
Recent University Graduates
People recently redundant
People looking for a job after losing there one
Structural
Definition
Jobs taken by machines and therefore workers will need to be retrained.
Example
Workers in declining industries lose thier jobs and lack the skills to find alternative employment. This is about the immobility of labour, occupation and geography
Cyclical
Definition
Jobs that follow the economic cycle such as during a rescession unemployment rises and employment lowers.
Examples
This is unemployment related to the economic cycle. If there is a lack of AD so demand for labour decreases
Factors effecting Unemployment
Demand Side
Strength of AD
Cost of employing workers
Changes in Exchange rate
Changes in Government Spending
Impact of Foregin Direct Investment
Employment Policies
Supply Side
Incentives to search for and accept paid work
Skill of Labour force
Change in geographical mobility of labour
Impact of changes in net migration of workers
Changes in retirement age
Real Wage Unemployment
Also Known as Classical Unemployment, it occurs when the minimum wage is set above equilibrium wage rate in the labour market
Causes a market distortion of labour
Natural Rate of Unemployment
The equilibrium rate of unemployment where real wages have found thier free market level and where AS of labour is in balance with the AD of labour.
At natural rate, all those wanting to work at the prevailing real wage rate have found employment and there is no involuntary unemployment.
Consequences of Unemployment
For Individuals
Loss of Icome
Social Costs
Increase the pool of labour
Experience of unemployment might prompt some people to become self employed and start thier own buisines
For Economic Performance
Negative Multipler Effect
Loss of National Output
Fiscal Costs