# MACROECONOMICS - unemployment

?
what is the working age population ?
ages 16-64
1 of 36
what is meant by inactive population
people of working age who are not able or not actively seeking work they are economically inactive
2 of 36
define unemployment
people who are able to work and are actively seeking work but are not current working
3 of 36
how do you calculate unemployment rate
number of unemployed ppl / active population x 100 = %
4 of 36
what is the unemployment level
number of people unemployed
5 of 36
how do you calculate the employment rate
employment level / working age population x 100
6 of 36
how do you calculate the unemployment rate
unemployment level / active population x 100
7 of 36
whats the difference between the unemployment rate and the employment rate
unemployment rate is the % of ppl unemployed whereas the employment rate is he % of ppl who are in employment
8 of 36
what is the active rate
aka the participation rate - tells us what % of the working age population are actually working calculated by active population / working age population x100 to get a %
9 of 36
what is the active population
active pop = num of employed ppl + num of unemployed ppl
10 of 36
what are 2 reasons why the employment rate might fall ?
employment rate = num of employed ppl / working age population x 100
1. decrease in num of employed ppl
2. increase in the working age population
11 of 36
2 reasons why the unemployment rate might fall
unemployment rate = num of unemployed ppl / active population x 100
1. decrease in num of unemployed ppl
2. increase in the economically active population
12 of 36
if the unemployment level increases by 10 million what will happen to the employment level?
its impossible to tell without more info , num of unemployed couldve increased bc of immigration or bc ppl who were inactive decided to start working these can both increase unemployment withoit affecting employment
13 of 36
an increase in the employment rate will be due to what ?
an increase in the number of employed people or a decrease in the working age population
14 of 36
what are the two things used to measure unemployment ?
1. ILO labour force survey
2. claimant count
15 of 36
explain the ILO labour force survey
80,000 households are interviewed and then surveyed on the phone every quarter to ask whether they are unemployed. in this survey u r considered unemployed if been out of work for 4 weeks or more n r ready to work within next 2 weeks n actively looking fo
16 of 36
what does the claimant count measure ?
how many people are claiming unemployment benefits eg job seeker allowance eg if 1.4 million ppl were claiming unemployment benefits the CC would say 1.4 million ppl are unemployed
17 of 36
what are the limitations of labour force survey ?
- 80,000 households isn't all households - inaccurate estimation of unemployment across the UK - 27 million households in the UK
18 of 36
what is the limitation of using the claimant count to measure unemployment ?
- not everyone who is unemployed claims benefits, - stigma around unemployment - job centre n lots of forms+ if unemployed but partner is a high earner, ur not allowed to claim benefits - so unemployment will be underestimated
19 of 36
what does the UK government use as the official measure of unemployment
ILO labour force survey
20 of 36
what are the 5 types of unemployment ?
1. classical / real wage unemployment
2. cyclical unemployment
3. structural unemployment
4. frictional unemployment
5. seasonal unemployment
21 of 36
how is real wage unemployment shown on a labour market diagram ?
when the wage is ABOVE the equilibrium, means that there is high supply of labour but low demand which creates excess supply of labour aka unemployment
22 of 36
what are the axis on a labour market diagram ?
like a micro supply and demand diagram so S and D curves
on the vertical axis there is 'wage' and on the horizontal axis it is quantity of labour Ql
23 of 36
why does real wage / classical unemployment occur ?
because the wage is higher then the equilibrium wage - creates excess supply of labour which is unemployment
24 of 36
why would the wage stay at W1 (above the equilibrium) instead of decreasing back down to wage equilibrium so there's no excess supply of labour ?
the government has made it illegal to pay workers the equilibrium wage - if the gov sets a NMW above equilibirum its illegal for firms to pay less then this wage so will remain stuck at w1 where there is more supply of labour then D
25 of 36
what are 2 reasons why the wage might be above equilibirum (real wage / classical unemployment )
1.Gov may have set a NMW so its ilegal for firms to pay less
2. power of trade unions can push wages above equilibrium
26 of 36
what is cyclical unemployment ?
demand deficient unemployment - isnt enough D for g&s - firms produce less n downsize - reduces D for labour bc its derived - fire workers - higher unemployment (cyclical)
27 of 36
what is structural unemployment and when does it occur ?
occurs when the strcuture of the economy changes and jobs shift from one sector to another - there is a mismatch of skills
28 of 36
two reasons for structural unemployment ?
1. occupational immobility
2. geographical immobility
29 of 36
how does occupational immobility cause structural unemployment
occupational immbolity means people cant move between different jobs bc they lack the skills needed - structural unemployment
30 of 36
how can the government help people who are structurally unemployed ?
gov can intervene by increasing
1. education 2. training 3. apprenticeships
31 of 36
how does geographical immobility lead to structural unemployment ?
if georgpahical immobile - workers cant move locations mayb because of time consuming, expensive, family ties etc therefore they are structurally unemployed
32 of 36
how can the government help people who are geographical immobile
-intervene by improving transport eg HS2 makes travelling to london cheaper n quicker
-relocating subsidies to help the cost of moving
33 of 36
what is frictional unemployment ?
when people are temporarily unemployed while searching for a new job - they are in between jobs
34 of 36
what is seasonal unemployment ?
when workers who are only needed for a high demanded season, once the season is over they are unemployed as not needed anymore
35 of 36
what is hysteresis ?
when a recession causes long lasting effects which persist after the economy comes out of recession - so the long term effects of a recession on unemployment
36 of 36

## Other cards in this set

### Card 2

#### Front

what is meant by inactive population

#### Back

people of working age who are not able or not actively seeking work they are economically inactive

### Card 3

#### Front

define unemployment

### Card 4

#### Front

how do you calculate unemployment rate

### Card 5

#### Front

what is the unemployment level