unemployment

• what are the 6 types of unemployment

  -voluntary

  -involuntary

  -structural

  -cyclical

  -seasonal

  -frictional
• define voluntary unemployment 


  when a person choses to be unemployed a they are not willing to work at the given market wage rate
• define involuntary unemployment 


  when a person is willing to work at given wage rate but is unable to find a job
• define structural unemployment 


  when unemployment occurs due to industry decline- can be difficult to transfer skills
• define cyclical unemployment 


  when unemployment occurs due to a recession due to a fall in demand for labour
• define seasonal unemployment 


  when a worker is out of work due to their job being seasonal - think tourism
• define frictional unemployment 


  when somebody is unemployed because thy are between jobs
• what are the two forms of labour immobility

  occupational

  geographic
• what is occupational immobility

  when skills are mot transferable to other industries - often linked to structural unemployment
• what is geographic immobility

  when people are unable to access employment as they cant get to where the work is
• define the poverty trap 


  when a person becomes worse off by taking a job - no incentive to work
• what are the two main ways people fall into the poverty trap

  their benefits are worth more than their wages

  the increased expenditure of employment makes them worse off
• what is real wage unemployment 


  when wages are set above the equilibrium meaning supply of labour> demand for labour
• what type of unemployment is real wage unemployment

  involuntary as people are willing to work at going rate but are unable
• what is the concept of sticky wages

  theory would say wages fall to W1 from Wmin but stick wages occur and wages cant really fall due to unions etc. its more likely employers let real wages fall

  
• what type of demand is labour

  derived demand- more demand for goods and services then there is greater demand for labour
• how does technology effect demand for labour

  automation means business require fewer workers
• how can benefits effect supply for labour

  the ease and size of benefits
• what is the populations size effect on the supply of labour

  the larger the working population including immigration the more people that are likely to want to work reducing job vacancies but also potentially increasing unemployment as more people get fewer jobs
• what are the consequences of unemployment for individuals

  -loss of income

  -loss of identity

  -long periods of unemployment can lead to a devaluation of the skills you possess -hysteresis
• how can unemployment affect the economy

  -AD falls as C falls

  -government budget position worsens- fall in taxes and rise in benefits

  -fewer imports means an improvement in the balance of payments
• what is the natural rate of unemployment

  the rate of unemployment the economy cannot go below in the long term or the rate where involuntary unemployment is 0
• what determines the natural rate of unemployment

  -size of working population - immigration, retirement age, school leaving age

  -wage rate - minimum wage

  -benefit size and ease to claim

  -skill level in economy

  -health of workers - effects ability to work
• what supply side policies can affect the natural cause of unemployment

  -education and training

  -incentives to work - reduce direct taxes, reduce benefits

  -reduce number of economically inactive people - grant greater childcare subsidies
• define unemployment


  when a person is not in work, education or training and is actively seeking employment whilst claiming job seekers allowance