2 Aims and Objectives Aim: Understand types of unemployment Objectives: Define 2 measures of unemploymentExplain current trends in UK & EUAnalyse causes of unemploymentEvaluate social costs of unemployment
4 UnemploymentNumber of people willing and able to work but unable to find work.2.67 million8.4%
5 LFS & Claimant Count LFS Includes people who have looked for work in the past month and are able to start work in two weeks.Claimant CountIncludes people able to claim JSA.
6 Equilibrium Unemployment ALF = aggregate labour force of a nation.ASL = aggregate supply willing to work at W1.Unemployment = difference between ALF and ASL.Q2-Q1RWRASLALFW1ADLQ2Q1EMPLOYMENTRe-create on your whiteboards and explain.
7 Replacement RatioIn the case of a low paid worker loosing their job the replacement ratio is one factor influencing time spent searching for a new job.Replacement Ratio = disposable income out of workdisposable income in workHigh level of benefits disincentives employmentRatio of 1 means receive same on benefits as would if employed.High ratio = unemployment trap
8 Replacement Ratio Age Range JSA Maximum Amount Under 25 £53.45pw Over 25£67.50pwCouple£105.95pwBeauty Technician Job – Barton Le Clay £6.08ph 16 hours per weekCalculate Replacement Ratio£53.45/£97.28 = 0.55The benefits received when unemployed 'replace' 55% of the worker's disposable income when in work.
9 Replacement Ratio Age Range JSA Maximum Amount Under 25 £53.45pw Over 25£67.50pwCouple£105.95pwOver 25Care Assistant Dunstable £8.07ph 25 hours pwCalculate Replacement Ratio£67.50/£ = 0.33The benefits received when unemployed 'replace' 33% of the worker's disposable income when in work.For which job is there more incentive to remain on benefits and unemployed?
10 Types of Unemployment Task Can you remember the five types of unemployment in an economy?
11 Seasonal Unemployment Unemployment from seasonal jobs, e.g. Fruit pickingTechnological UnemploymentUnemployment due to technological advancements.Structural UnemploymentUnemployment due to declining industries such as mining or ship buildingFrictional UnemploymentPeople who are unemployed between jobsCyclical UnemploymentGeneral unemployment which follows the business cycle
12 Cyclical Unemployment PRICE LEVELArises during downturn/recessionFall in AD actual GDP lies below potential GDP – negative output gapLabour derived demandUnemployment risesAD1LRASAD2P1Y2Y1REAL GDP