Unemployment

• How do unemployment and inflation relate to each other?

  Unemployment and inflation go against each other, as high unemployment leads to lower spending and falling prices.
• What is the graph that illustrates the relationship between unemployment and inflation?

  The Phillips curve.
• What happens to prices when unemployment is high?

  When unemployment is high, people save money, causing prices to fall.
• How might the government reduce unemployment?


  By spending more on training.
• What is a potential downside of raising taxes on the rich to reduce inequality?


  It may disincentivize workers.
• How does the fiscal deficit relate to low unemployment in the short run?


  The fiscal deficit may conflict with low unemployment targets in the short run.
• What is the definition of unemployment?


  Someone who is actively seeking a job but is currently without a job.
• What are the two main measures of unemployment?

  Claimant Count (CC) and International Labour Organisation (ILO) measure.
• What does the International labour oraganisation measure of unemployment require?

  That someone has been actively seeking work for the past four weeks and is ready to start in the next two weeks.
• What does unemployment indicate about the economy?


  If people are unemployed, their income is lower, leading to a lower standard of living.
• What does being underemployed mean?


  Workers who want more hours but cannot get them.
• What is productivity defined as?


  The output per unit of input per hour.
• How is labour productivity measured?


  As the output per worker per hour.
• What is the significance of higher productivity?


  It allows goods and services to be sold at a cheaper price to international markets.
• What is the relationship between productivity and international competitiveness?

  Higher productivity allows for cheaper production, enhancing competitiveness.
• What is a non productive expenditure


  When the governement spend on something that may not help gdp such as removing grafiti but it will improve the standard of living
• What is the relationship between cyclical unemployment and aggregate demand?

  High cyclical unemployment indicates low aggregate demand
• Which countries in the European Union have faced major cyclical unemployment issues?

  Portugal and Spain
• What are the social costs of high unemployment?

  • Increase in relative poverty and welfare dependency
  • Extra demands on NHS due to stress-related illnesses
  • Link between persistent unemployment and social problems
• What are the causes of youth unemployment?

  • Skill gaps and reluctance of employers to hire younger workers
  • Declining pension income leading to fewer early retirements
  • Weak macro fundamentals like low GDP growth
• What was the youth unemployment rate in the UK in August 2022?

  9%
• What are macro stimulus policies to reduce unemployment?

  Lower interest rates and infrastructure investment projects
• What are competitive policies to reduce unemployment?

  • Reductions in corporation tax to increase investment
  • Tax incentives for research and innovation spending
  • Enterprise policies to boost new business startups
• Issues with the claimant count

  • Does everyone who is eligible sign on? (Underestimates)
  • Self-employed workers who are temporarily unemployed tend not to claim (underestimates)
  • Under 18s and over 60s don't count (underestimates)
  • Changing criteria for JSA (underestimates)
  • Some people who claim JSA aren't actively seeking work (overestimates)
  • Some have jobs in black economy but continue to claim benefits (overestimates)
• The International Labour Organisation (ILO) and the UK Labour Force Survey


  Quarterly survey of approximately 60,000 households compiled by the Office of National Statistics studying the employment circumstances of the UK population
• Real wage inflexibility



  Occurs when real wage rates are above the equilibrium wage rate, causing the supply of labour to be greater than the demand for labour
• Employment rate



  Percentage of the population aged 16 to 64 who are in work
• Economically inactive



  People of working age who are not looking for work, for a variety of reasons
• Unemployed



  People who are economically active but are not in employment
• Unemployment rate



  Proportion or percentage of economically active people within a country who are unemployed
• Claimant Count Unemployment



  Number of people claiming the Jobseeker's Allowance each month
• ILO unemployment rate



  Measure of the percentage of the workforce who are without jobs, but are available for work, willing to work and looking for work
• Underemployment



  Where an individual is employed in a second-choice occupation or is only able to work part-time but would like to work full-time
• Full employment



  Involves zero or very low unemployment. In practice there will always be some frictional unemployment as people are looking for new jobs or leaving school. Economists suggest an unemployment rate of 3% is close to full employment
• Advantages of ILO Unemployment



  Internationally standardized

  Usable for inter-country comparisons

  Considerable potential for analysis of other labour market characteristics, or of particular sub-groups

  Articulated with data from the same source on employment and the economically active
• Disadvantages of ILO Unemployment

  • Relatively costly to compile
  • Normally less timely
  • Subject to sampling and response error
  • Not always suitable for small areas due to sampling limitations
• Advantages of Claimant Count Unemployment

  • Relatively inexpensive
  • Available quickly (normally monthly)
• Disadvantages of Claimant Count Unemployment

  • Not internationally recognized
  • Coverage changes whenever administrative system changes, although recalculation of consistent series allows meaningful comparisons over time
• Why is the unemployment rate data inaccurate

  • No measure of unemployment is completely accurate since there are some people out of work but looking for a job who are not picked up by the official statistics
• What is structural unemployment


  When a persons skills can no longer fill the position required for the job