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UNEMPLOYMENT

UNEMPLOYMENT. The uk economy (macroeconomics) Topic 2. WHO IS UNEMPLOYED?. A person who is able, available and willing to work but cannot find a job. THE CLAIMANT COUNT. Published each month and shows the number of people able to claim the Job Seekers Allowance (JSA).

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UNEMPLOYMENT

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  1. UNEMPLOYMENT The uk economy (macroeconomics) Topic 2

  2. WHO IS UNEMPLOYED? • A person who is able, available and willing to work but cannot find a job.

  3. THE CLAIMANT COUNT • Published each month and shows the number of people able to claim the Job Seekers Allowance (JSA). • Unemployment is expressed as a percentage of the working population. This is employees in work, the self-employed and the unemployed.

  4. CRITICISM OF THE CLAIMANT COUNT • Frequent changes in the method of calculation. • Some unemployed people are not included because they don’t register for unemployment benefit. • Some people work in the “black economy” and fraudulently claim benefit. • Strict JSA criteria prevents some unemployed people from claiming. • The change from unemployment benefit payable for 12 months to JSA payable for only 6 months has reduced the number of claimants.

  5. SEASONAL ADJUSTMENTS • The claimant count is normally seasonally adjusted. • This removes the effects of the predictable seasonal fluctuations in unemployment. E.g.builders in the winter

  6. THE LABOUR FORCE SURVEY • Since 1998 this method of measuring unemployment has also been published. • The LFS is similar to the method used by other countries. • People in employment, unemployed and economically inactive make up the total household population aged 16+.

  7. The LFS samples 150,000 people and counts as unemployed those who: • Were available to start work in the next two weeks, and • Had actively seeked work in the last four weeks, or • Had found a job and were waiting to start. • The numbers from LFS are higher than the claimant count but deemed to be more accurate. • The economically inactive are those people who are not in work, but who do not satisfy all the criteria for Labour Force Survey unemployment

  8. WHY MEASURE UNEMPLOYMENT? • Unemployment is a key indicator of the performance of an economy. • It is also a major social problem and the government need to know the scale of the problem before trying to fix it. • They also need to know how long they have been unemployed, what age group they are, the regions they are in and the industries that are affected. • This will help policies makers put into place the right policies to help improve the situation.

  9. TYPES OF UNEMPLOYMENT The uk economy (macroeconomics) Topic 2

  10. TYPES AND CAUSES • Cyclical This type of unemployment is associated with a recession in the economy. Aggregate demand has fallen for products.

  11. TYPES AND CAUSES • Structural This type is associated with changes in the structure of an industry. • New Technology. If an industry is moving to more capital intensive productive it may pay off some staff. However, in the long term new technology creates jobs. • Falling demand. If there is long-term decline in demand for a product firms will need to lay off staff.

  12. TYPES AND CAUSES • Frictional • This is when there are barriers to the free movement of the unemployed into job vacancies. Caused by: • A lack of knowledge about job vacancies • Occupational immobility • Geographical immobility • Disincentives to work – worker might think that claiming benefits might work out financial better than working.

  13. TYPES AND CAUSES • Seasonal This occurs in industries such as agriculture, tourism and building where the number of people employed fluctuates depending on the time of year.

  14. FULL EMPLOYMENT • This does not mean that everyone who is looking for a job has one. There is no one definition of full employment. • One early definition was that full employment would be when the number of unfilled jobs equalled the number of the unemployed. • Another was that full employment would be achieved when the unemployment rate was 3%. • Today economists and politicians talk more about a concept than a figure. They say that full employment is when unemployment equals the natural rate of unemployment.

  15. Full employment • The natural rate of unemployment is seen as the level of unemployment below which there would be a rise in inflation. • Unemployment below this rate would lead to labour shortages in some sectors but high demand and so would increase the pressure on wages and prices. • The natural rate is sometimes called NAIRU – The NON-ACCELERATING INFLATION RATE OF UNEMPLOYMENT.

  16. EFFECTS OF UNEMPLOYMENT Unit 2 Topic 2

  17. FOR THE INDIVIDUAL • Economic Effects • Reduced income • Reduced standard of living • Reduced efficiency • Social Effects • Reduced status • Increased health problems

  18. FOR BUSINESSES • Negative • Fall in demand for products • Knock-on effect on suppliers– MULTIPLIER EFFECT • Positive • Bigger pool of labour available • Less pressure to pay higher wages • Less risk of industrial actioN

  19. FOR THE ECONOMY • Economic Costs • Lost output – real GDP will fall – economy will be operating within its PPC. • Multiplier effect of reduced demand. Reduced spending leads to reduced jobs. • Reduced taxation revenue. • Increased burden on taxpayers e.g. Benefits • Social Costs • Increased crime • Civil unrest • Increased burden on the health system

  20. EVIDENCE OF UNEMPLOYMENT The uk economy (macroeconomics) Topic 2

  21. Cyclical • When the UK experienced a recession between 2008 and 2012 there was a fall in aggregate demand. Structural • There has been a decline in many manufacturing industries. The reasons for this include: • Inability to compete with foreign competition e.g. ‘tiger economies’ • Rapid mechanisation • Privatisation of national industries e.g. BT

  22. TRENDS • From1993 to 2007 the UK experienced a downward trend. • This can be account for by: • Sustained economic growth • A slowdown in the numbers of school leavers - More students going to Uni or College. • Success of the “Welfare to Work” programme • 2007 to 2012 the UK experienced and upward trend. • This can be accounted for by: • Recession • Fall in aggregate demand • Reduction in Government spending

  23. REGIONAL DIFFERENCES & Patterns of employment REGIONAL DIFFERENCES • There are huge differences in unemployment depending on the part of the UK you live. • Regions closer to London or the South East of England have low unemployment. Whereas Scotland, Northern Ireland and the North East of England tend to have high unemployment. PATTERNS • Fall in employment in Primary and Secondary sector • Rise in tertiary sector employment • Rise in female employment and reduction in male employment.

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