Unemployment

• What does unemployment mean?

  Unemployment means that one of the four factors or production (labour) isn’t being used fully and efficiently which should hinder economic growth.
• What is the definition of frictional unemployment?

  Between jobs. Moving from one job to another job.
• What is the definition of the labour force?

  those holding a job or registered as willing and able to work.
• What is the definition of unemployment?

  The percentage of people in the labour force without a job but registered as being willing and available for work.
• What is the definition of underemplyoment?

  Someone who is willing and able to work full time hours but can only find part time employment.
• How is unemployment measured?

  • claimant count
  • labour force survey
• What is the definition of claimant count?

  The number of people eligible for unemployment benefits .i.e. job seekers allowance.
• What is the definition of labour force survey?

  A survey based on the ILO (International Labour Organisation)standards asking people whether they are out to work and actively seeking work .i.e. Home makers (stay at home parents e.g.).
• Give examples of people who do not have jobs but are not considered unemployed?

  • homemakers
  • students
  • elderly
  • disabled
• What are the causes of unemployment?

  • supply side

  . structural

  .seasonal

  .frictional

  .geographical

  • demand deficient/cyclical
• Give a summary of impacts of frictional unemployment?

  • workers are in between jobs

  While workers are between jobs it means that they may not spend much on luxury products during this period of time so demand in the economy may fall. However, this depends on how long the workers are out of work for.
• Give a summary of structural unemployment?

  • workers lack the necessary skills

  . This impacts the economy because businesses will suffer from less labour due to lack of skills (a decrease in one of the FOP) and so in the long term, there may be a shift inwards in the PPF, due to less consumer and capital goods being produced.

  . in skilled jobs where there’s loads of skilled workers, wages will decrease due to competition so profits of businesses are likely to increase, improving the economy. However, in jobs where skilled workers are limited, wages will increase, so the economy may suffer.
• Give a summary of the impact of geographical immobility?

  • workers unable to move to a new location for work

  . If workers cannot locate to new areas for work, it only lead to limited skilled workers not being able to work for skilled jobs that are high in demand and so the economy may suffer from not benefiting from skilled labour due to geographical immobility.
• Give a summary of the impact of seasonal unemployment?

  • occurs when people are unemployed at particular times of the year when demand for labour is lower than usual.

  . Leads to income instability for workers who are seasonally employed and means that they may reduce consumption throughout the months of not working.
• What is meant by demand deficient?

  Lack of aggregate demand in the economy.
• What are the impacts of demand deficient?

  Usually causes the highest levels of unemployment, compared with other types. This can cause a bigger cost for the government as more people will be claiming unemployment benefits and with low economic growth in the economy, this can lead to a recession in the economy and the government will have a budget deficit. This leads to cost push inflation which will only make goods and services more unaffordable for consumers, and so the problem continues.
• What are the stages of the downward cycle?

  • increased unemployment
  • reduction in consumer spending
  • firms sales decline
  • firms shut down or look to reduce costs

  This happens in a circular motion.
• As a result of the downward cycle, what happens to economic growth and demand for luxury items?

  . demand for luxury items decrease

  . lower economic growth and inflation
• What are the stages of the upward cycle?

  • decreased unemployment
  • increase in consumer spending
  • firms‘ sales increase
  • firms are able to take on new staff

  This happens in a circular motion.
• As a result of the downward cycle, what happens to demand for luxury items and economic growth?


  . demand for luxury items increase

  . higher economic growth and inflation