unemployment

• what is unemployment?

  tends to fluctuate inversely with economic growth, not everyone without a job is unemployed. the rate of unemployment is usually expressed as a % of the labour force.
• what is the current unemployment rate?

  according to current data 3.8% of the UK labour force is unemployed, approx 1.4 million people
• what is the claimant count?

  amounts to all people receiving unemployment benefit, alternative claimant count also includes those claiming universal credit. both exclude unemployed people who arent eligible
• what is labour market / disequilibrium unemployment?

  when real wage is above the level needed to achieve equilibrium in the labour market
• Reasons why disequilibrium unemployment can arise

  1. Trade union power forces wages upwards or the imposition of a national minimum wage above the equilibrium wage rate

  2. Lack of consumer demand (demand deficiency) this means firms will reduce demand for labour and the curve shifts left. Normally causes wage rates to fall however this trends to not happen as firms will pay but let some go. Even if wages did fall this would tend to reduce demand further as people have less income

  3. Increases in the supply of labour will tend to move the supply curve to the right and depress the wage rate. Again there will be resistance to this. its a problem of demographics or mass immigration leading to changes in population size
• whats equilibrium unemployment?

  economy may be in equilibrium but unemployment will still exist because of a mismatch between the demand and supply of labour
• what are the 2 types of equilibrium unemployment?

  Structural and frictional
• whats frictional unemployment?

  Temporary unemployment between jobs. this can be minimised by providing more information about vacancies or encouraging people to be more geographically mobile
• what is structural unemployment?

  Unemployment caused by a mismatch between the skills of job seekers and the requirements of available jobs. May be a result of traditional industries disappear over time, change in taste and tech, overseas competition
• what are the 4 costs of unemployment?

  a. cost to the unemployed financially and psychologically.

  b. financial costs to tax payer and government, in benefits and loss of tax revenue.

  c. waste of scarce resources, skills are eroded over time reducing quality of those resources.

  d. correlation between unemployed and crime / social unrest