2.3 Employment

• Employment rate is the number of those in work divided by the population of working age expressed as a percentage.
• Unemployment rate is the proportion of the working age population seeking work (economically active) but who do not have a job.
• Voluntary unemployment is a situation arising when an individual chooses not to accept a job at the going wage rate.
• Involuntary unemployment:

  a situation arising when an individual who would like to accept a job at the going wage rate is unable to find employment.
• Economically inactive are those who are of working age but are neither in work nor actively seeking work (and so are not in the labour force).
• full employment is when all those who are economically active and are willing and able to work (at the going wage rate) have a job.
• Occupational immobility is the inability of workers to move from one job to another in a different industry due to barriers
• Geographical immobility is the inability of workers to move from one job in a particular area to a job in another area.
• Labour Force Survey (LFS) is a measure of the percentage of the workforce who are without jobs but are actively seeking and available for work, whether or not they are claiming benefits.
• LFS disadvantage is that the estimate is calculated by surveying 60,000 households and extrapolating from the data sample to give an estimate of unemployment in the whole country, & so is therefore unlikely to be wholly accurate.
• Claimant count is the method of measuring unemployment according to those people who are claiming unemployment - related benefits (Jobseeker's Allowance)
• Claimant count advantages is that it can be conducted cheaply & easily as the government already has a record of those claiming JSA.
• Claimant count disadvantages is that it excludes those who don't claim JSA.

  Impossible to make accurate international comparisons as not every country has a benefits system.

  Universal credit has distorted the Claimant Count measure.
• Frictional unemployment is unemployment associated with job searching. It is those who are between jobs. It will always exist.
• Cyclical unemployment is unemployment that arises throughout the course of the economic cycle: it rises during economic downturns and falls when the economy improves.
• Demand-deficient unemployment is unemployment that arises because of a deficiency of aggregate demand in the economy, so that the equilibrium level of output is below full employment
• seasonal unemployment is unemployment that arises during certain seasons of the year.
• Structural unemployment is unemployment that occurs when workers' skills do not match the jobs that are available, due to changes in the pattern of economic activity within an economy.
• Costs of Unemployment are

  Lost output.

  Lower living standards.

  Drop in tax revenues & higher welfare = budget deficit.

  Unemployed may move overseas.

  Increase in relative poverty.

  Extra demands on NHS.

  Social problems.

  Labour scarring & hysteresis effects.
• Benefits of unemployment are:

  Increases the pool of potential workers.

  Keeps both wages and salaries down - inflation is lower.

  Individuals can benefit from moving jobs.

  Insentive to gain or retain skills.

  Rise in self-employment start-ups.
• Effects of full employment:

  Maximises potential output of the economy.

  Could result in demand-pull inflation/cost push inflation

  Inequality may fall.

  Reduced crime/social conflicts.

  Increased consumer/business confidence.

  Improvement of the government budget position.

  There could be underemployment though.
• Discouraged workers are individuals who would like to work but have given up looking for a job
• Labour market participation rate:

  the proportion of the working age population who are economically active in the labour force (in work or actively seeking work).
• LFS advantages is that the measure can be used to make international comparisons. The definition corresponds with that used by the International Labour organisation.