Low Unemployment

Definition  Actively seeking a job but unable to find work.

How it is calculated  Unemployment rate is equal to:  Number of unemployed/labour force x 100

Two ways of measuring it.  ILO – This is the International Labour Organisation – an international body that studies labour in various countries.  Claimant Count – the number of people who physically show up every week to claim unemployment welfare.

How are they different. 1. Claimant Count does not include A) unemployed people whose spouse is earning money. These people are genuinely unemployed but cannot claim because of their spouses’ income. B) Unemployed people who, because of a private pension, are not entitled to claim. c) Unemployed people aged d) full time students looking for part time work.

 Unemployment in an economy with a given labour force will rise if the number of workers gaining jobs is less than the number of workers losing jobs.

 Unemployment can fall for good reasons – firms are expanding, feeling confident and take on staff who would otherwise be unemployed

 However, be careful, unemployment can also fall for bad reasons.  Emigration.  People drop out of the labour market.  Increase in those claiming incapacity benefit.  Look to the U.S.A following the collapse of 2008.

Proof of the existence of God.

 businessinsider.com/chart-of-the-day-real- corporate-profits-yy-vs-1-year-difference- in-unemployment-rate-reverse-scale &sa=U&ei=8qBYVKvnCsuV7Aan5IHIDA&v ed=0CCQQ9QEwBw&usg=AFQjCNGkR8u 105AW3BVnWV7RSSCPsO9hog

Why does it lag? 1. Labour is one of the last thing that firms will cut when a recession starts – legal and humane reasons explain this. Firing somebody with immediate notice is legally difficult. 2. Labour is one of the last things that firms will increase when a recession ends – they will offer more time to existing members of staff first.

ILO and Claimant Count  ILO-defined unemployment in June to August was 2.45 million (7.7%) - down by 20,000 on the quarter.  The claimant count for key out-of-work benefits was 1,470,000 million in September - up by 5,300 on last month  Explain Why?

Four types of unemployment  Frictional – people changing jobs – looking for a new one. Usually quite short term and not regarded as terribly serious.  Seasonal – particularly affects agricultural and tourism workers.  Structural – much more serious, affects areas where once there was a strong, dominant industry – North of England coalminers.

 Cyclical or demand deficient unemployment. This occurs during an economic recession/depression such as the 1930s or today.

 Monetary, Fiscal and Supply Side policies are better at fixing some kinds of unemployment more than others.  Can anyone begin an attempt to explain this?

The Economic Cost of unemployment  Government loses revenue on the double. Rate of consumption and aggregate demand fall.  Income Tax revenue falls.  VAT Revenue falls.  Government spending increases, less room for discretionary expenditure.

Long Term Unemployment  This can reduce the will to work or look for work.  Skills can be lost.  Crime, depression, marriage breakdown, drop in esteem and even suicide.  Lower levels of aggregate demand.  Brain drain.  Increase in isolationist policies.

 However, some business leaders like having a pool of unemployed labour. This reduces the negotiating power of those who have jobs while at the same time makes it easier for them to find more workers in the event of expansion.

Underemployment.  Underemployment is the condition of a worker who is technically employed, but is either over-qualified for the type of work they are doing or are working part time when they want to be working full time.  This is not accounted for in unemployment figures.