Download Topic 2.1.3 Employment and unemployment student version

2.1.3 Unit content
Students should be able to:
• Explain how unemployment is measured (the claimant
count, the International Labour Organisation (ILO) and
the UK Labour Force Survey)
• Distinguish between unemployment & under-employment
• Evaluate the significance of changes in the rate of
employment, unemployment and inactivity
• Analyze five causes of unemployment
• Assess the significance of migration and skills
• Evaluate the effects of unemployment on consumers,
firms, workers, the government and society
Definition - what is unemployment?
Unemployment refers to the _______________
__________________________________________
 However there are different ways of measuring
this. Why?

Level versus rate of unemployment
The level of unemployment is the number of
people not in work, while the rate of
unemployment is the % of people not in work
relative to the size of the workforce.
The workforce is people who are at work and
those of working age who are willing and able to
work (i.e. the employed and the unemployed).
Why does unemployment change?
People may:
The Claimant Count measure of unemployment
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The Claimant Count measure is people who are
eligible to claim Job Seeker’s Allowance.
JSA was introduced in 1996 (previously
unemployment benefit).
One problem with this measure is that it misses
out people who are interested in seeking work
and have looked but they don’t meet all the
criteria for claiming.
Key exam points about the Claimant Count
measure
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It is the number of people claiming JSA (2 marks)
Age range is 18 to retirement (1 mark)
There is a savings cap (1 mark)
Must be able to prove they are looking for work (1)
Have to register at an unemployment office (1)
Ignores people who are eligible but don’t claim
Ignores people (often women) who aren’t eligible because
their partner works or because of their financial position
Can’t claim if resigned from job in the last 6 months or if
you have refused 3 job offers
Must have paid a certain amount of National Contributions
The Labour Force Survey: ILO measure
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The International Labour Organisation ILO
measure refers to the number of jobless people
who have looked for work in the last month and
are able to start work in the next two weeks.
In the UK it is collected by the Labour Force
Survey. On average the Iabour force survey
exceeds the claimant count by about 800,000
since it includes people available for work who
may not claim benefits.
It is an international measure and so can be used
to compare countries.
Key exam points about the ILO
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It refers to people who have been out of work in
the last four weeks (1 mark)
They must be ready to work in two weeks (1 mark)
and actively looking for work (1 mark)
It is measured by a questionnaire/interview (1)
called the Labour Force Survey (1 mark) carried
out quarterly (1 mark)
Only a sample of people are surveyed (1 mark)
Internationally recognised measure (1 mark)
It is people of working age, aged 16 – 65 (1 mark)
Why was the claimant count higher than
ILO in 1992?
Current figures
The UK unemployment rate was ____% (August –
October 2015). Usually unemployment refers to ILO
 The number of unemployed people fell to reach
_____ million.
 The number of people claiming Jobseeker's
Allowance in May 2015 was ______ (ONS).

Highest figures for unemployment
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It is very hard to have accurate figures for
unemployment over time since measurements
have changed significantly.
In 1921 unemployment was recorded as 23%
but the numbers were low.
In 2011 unemployment was 8.1% - the highest
for 17 years
In 1994 it was 9.7%
Unemployment by country:
France, Germany, Spain, UK, USA
Country
Unemployment
2015
4.5%
5.0%
5.2%
10.6%
21.18%
Unemployment
2014
5.1%
6.3%
6.4%
10.2%
24.5%
Research the following types of
unemployment: how could they be reduced?
Frictional unemployment
 Seasonal unemployment
 Structural unemployment
 Demand deficiency and cyclical unemployment
 Real wage inflexibility
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Why is long term unemployment generally
considered a ‘bad’ thing for society?
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Costs
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Social stigma
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Loss of ‘human capital’
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Long-term:
Unemployment and the ‘classical’ view
The classical view: if unemployed people would
accept lower wages they could find work. Why?
People who believe that this is the only cause of
unemployment think that out-of-benefits should be
____, trade union power _______ and the minimum
wage ________ so people will be ________ to work.
Unemployment and the ‘Keynesian’ view
The Keynesian view is that people are unemployed
due to lack of (aggregate) demand in the economy.
Low demand means firms _____________________
__________________________________________
If wages were lowered then ____________________
People may worry about losing their job and so try
and save money (hence less demand).
Other factors may lower demand such as low
business confidence or an increase in the currency
(imports _______ and exports ________________).
the ‘Keynesian’ view continued
Structural unemployment is also not due to high
wages.
The Keynesian view is that the government should
implement policies to increase demand.
What is the link between employment and
(economic) growth?
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Why is employment linked with rapid growth?
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What happens as technology increases?
What is underemployment?
Underemployment occurs when one does not
have a job that is full-time or that reflects his or her
training and financial needs. It is not the same
as unemployment.
 The formula for underemployment rate is:
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What about “not working”?
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It is important to note that underemployed is
different from not working. Give examples
What is the significance of migration for
employment and unemployment?
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The impacts of immigration on the labour market
critically depend on the skills of migrants, the skills
of existing workers, and the characteristics of the
host economy.
UK research suggests that immigration has a
small impact on average wages of existing
workers but more significant effects along the
wage distribution: low-wage workers ______ while
medium and high-paid workers ________
What is the significance of migration for
employment and unemployment?
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The wage effects of immigration are likely to be
greatest for resident workers who are migrants
themselves.
Research does not find a significant impact of
overall immigration on unemployment in the UK,
but the evidence suggests that immigration from
outside the EU could have a _________ impact
on the employment of UK-born workers, especially
during an economic ___________
What is the significance of migration for
employment and unemployment?
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For both wages and employment, short run effects
of immigration differ from long run effects: any
declines in the wages and employment of UK-born
workers in the short run can be offset by
__________ wages and employment in the long
run.
The effects of unemployment on consumers,
firms, workers, the government and society

Summarize the effects of unemployment on
consumers, firms, workers, the government and
society