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Chapter 30 - Employment & Unemployment - CIE IGCSE/O Level

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Published in: Economics
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Revision summary of Chapter 30 - Employment & Unemployment of the CIE IGCSE & O Level coursebook.

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  1. EHPLOYHENT & UNENPLOYHENT CHAPTER 30 'Ill
  2. Learning Objectives Employment & Unemployment • define employment, unemployment and full employment • analyse the nature and causes of changes in the pattern of employment • describe how unemployment is measured • analyse the causes and types of unemployment (frictional, structural and cyclical) • discuss the consequences of unemployment • discuss the effectiveness of policies available to reduce unemployment
  3. CHANGES IN THE PATTERN OF EMPLOYMENT Industrial structure As economies develop, employment moves from the primary to the secondary and then tertiary sector % of women in employment Changing social attitudes toward working women has caused an increase in the overall proportion of women in the workforce Private vs public sector As economies shift from mixed to market, workers increasingly move from the public to the private sector Employed vs Self-employed As people seek greater flexibility and time location and financial freedom, self-employed work has been on the rise Full-time vs part-time Workers wh part-time may be students in u l- •me education or people with children; overall these people are looking for more flexibility and extra cash Formal vs informal work Those in the informal economy are self-employed, migratory or casual workers; growth in the formal sector may be caused by a cut in taxes High and low quality employment As economy develops, a shift from low quality (low skill, low pay and uninteresting) work to high quality work (the opposite) Flexible As econo tends to beco re exible (adapts + quickly and swiftly to changes in the market)
  4. FACTORS AFFECTING THE LABOUR FORCE PARTICIPATION RATE • Labour market participation rate: the proportion of the working-age population who are in the labour force. • It may grow as a result of an increase in the population of working age, a rise in the labour force participation rate or a combination of the two. Wages The higher the wages on offer, the more people will be persuaded to work Social attitutes to working women in countries where it is acceptable and commonplace for women to work, labour force participation rate is higher Provision for the care of children and the elderly The greater the availability of nursery places and retirement homes, the higher is the labour participation rate. Social attitudes and provision for the disabled to work The greater the number of people willing to accept disabled people working and the more accessible, the more disabled people will be willing and able to work Proportion of school leavers who go into higher education The more people there are in full-time education, the lower the participation rate, in the short run
  5. FRICTIONAL UNERPLOYRENT LABOUR FORCE SURVEYS Labour Force Survey (ILO) Measure: a measure of unemployment which counts as unemployed people who identify as such in a survey. Advantage: can be used to make international comparisons; more accurate than claimant count Disadvantage: accuracy heavily depends on the questions asked UNEMPLOYRENT BENEFITS Claimant count: a measure of unemployment which counts as unemployed those in receipt of unemployment benefits Advantage: straightforward Disadvantage: understates unemployment as only benefit recipients are counted
  6. FRICTIONAL UNERPLOYRENT SEARCH unemployment arising from workers who have lost their jobs looking for a job they are willing to accept. e.g. a person who quit their job due to poor working conditions and is searching for a job with working conditions deemed more acceptable (to that person) CASUAL unemployment arising from workers regularly being between periods of employment. e.g., actors are 'unemployed' when they're not filming a series or film SEASONAL unemployment caused by a fall in demand at particular times of the e.g. cruise staff may be unemployed during winter when people don't typically go on cruises
  7. OTHER CAUSES OF UNERPLOYRENT STRUCTURAL • caused by the decline of industries and particular occupations arising from long-term changes in demand and supply; examples are regional and technological unemployment Regional: unemployment caused by a decline in job opportunities in a particular area of the country. • Technological: unemployment caused by workers being replaced by capital equipment CYCLICAL • arises from a lack of aggregate demand may be even more serious than structural unemployment as potentially it can affect more workers • to combat, govt will seek to increase AD price level Real GOP
  8. THE CONSEOUENCES OF UNEXPLOYRENT ON THE... WORKER • fall in income, even generationally (if it lasts for a long time) • low self-esteem the longer this worker is away from work, the more difficult it will be for worker to rejoin the workforce as skills may become obsolete FIRRS firms benefit from unemployment, as it is cheap and straightforward to hire workers when the however, high unemployment is typically synonymous with low demand for the product at hand GOVT unemployment represents an opportunity cost (idle resources not being used) tax base and hence revenue will be lower govt will have to spend more money on unemployment benefits - yet another opportunity cost as that money could've been used finance investments in education and healthcare, for example
  9. POLICIES TO REDUCE UNERPLOYRENT FRICTIONAL • improve labour market via supply-side policies • i.e., cutting income tax and unemployment benefits STRUCTURAL • improve labour market via supply-side policies, focused on the skills of workers • i.e., if workers are trained in more skills, they become more adaptable and hence occupationally mobile SEASONAL • increase AD by means of expansionary fiscal and monetary policy HOW EFFECTIVE WILL THESE REASURES BE? has the source of unemployment been identified correctly? does the govt have the capital necessary to tackle whatever type of unemployment?
  10. You should know... • the pattern of employment can vary between sectors and industries over time. Some of those who work part-time do so because they want to work for fewer hours but some seek full- time employment. The rate of self-employment varies among countries. • A growth in the formal economy usually increases the quality of employment and productivity. High quality employment provides better opportunities and conditions for workers than Low quality employment. A flexible Labour market is one which responds quickly and easily to changes in market conditions. A rise in employment may be accompanied by a rise or fall in unemployment. An increase in the population of working age or a rise in the labour force participation rate increases the size of the Labour force. Factors affecting the labour force participation rate include the wages on offer, social attitudes to working women and the disabled, the provision for the care of children and the elderly and the proportion of school leavers going for higher education.
  11. You should know... Unemployment can be measured by counting those in receipt of unemployment benefits or undertaking a labour force survey. Frictional unemployment arises when workers are finding new jobs, after Leaving the old one. Three examples of frictional unemployment are casual unemployment, seasonal unemployment and search unemployment. Structural unemployment is caused by long-term changes in demand and supply. Two types of structural unemployment are regional and technological unemployment Cyclical unemployment results from a lack of aggregate demand. The unemployed suffer from lower income and possibly from lower self-esteem and bad health also. The longer people are out of work, the harder it can be for them to find employment. Unemployment is a waste of resources. It results in output and living standards being lower than possible, lower tax revenue and increased government expenditure on benefits and on other costs arising from unemployment. To reduce frictional and structural unemployment, a government will use supply-side policy measures. To reduce cyclical unemployment, a government will use demand-side policy measures.

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