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).
• Unemployment is expressed as a percentage of the
working population. This is employees in work, the
self-employed and the unemployed.
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.
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
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+.
• 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
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.
TYPES OF UNEMPLOYMENT
THE UK ECONOMY (MACROECONOMICS)
TOPIC 2
TYPES AND CAUSES
1.
Cyclical
This type of unemployment is associated with a recession in
the economy. Aggregate demand has fallen for products.
TYPES AND CAUSES
2.
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.
TYPES AND CAUSES
3.
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.
TYPES AND CAUSES
4.
Seasonal
This occurs in industries such as agriculture, tourism and
building where the number of people employed fluctuates
depending on the time of year.
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.
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 NONACCELERATING INFLATION RATE OF UNEMPLOYMENT.
EFFECTS OF
UNEMPLOYMENT
UNIT 2
TOPIC 2
FOR THE INDIVIDUAL
• Economic Effects
• Reduced income
• Reduced standard of living
• Reduced efficiency
• Social Effects
• Reduced status
• Increased health problems
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
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
EVIDENCE OF
UNEMPLOYMENT
THE UK ECONOMY (MACROECONOMICS)
TOPIC 2
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
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
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.