1. Unemployment

2. Aims and Objectives Aim: Understand types of unemployment Objectives:
Define 2 measures of unemployment
Explain current trends in UK & EU
Analyse causes of unemployment
Evaluate social costs of unemployment

3. Starter

4. Unemployment
Number of people willing and able to work but unable to find work.
2.67 million
8.4%

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 Count
Includes 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-Q1
RWR
ASL
ALF W1
ADL Q2 Q1
EMPLOYMENT
Re-create on your whiteboards and explain.

7. Replacement Ratio
In 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 work
disposable income in work
High level of benefits disincentives employment
Ratio 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
£67.50pw
Couple
£105.95pw
Beauty Technician Job – Barton Le Clay £6.08ph 16 hours per week
Calculate Replacement Ratio
£53.45/£97.28 = 0.55
The 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
£67.50pw
Couple
£105.95pw
Over 25
Care Assistant Dunstable £8.07ph 25 hours pw
Calculate Replacement Ratio
£67.50/£ = 0.33
The 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 picking
Technological Unemployment
Unemployment due to technological advancements.
Structural Unemployment
Unemployment due to declining industries such as mining or ship building
Frictional Unemployment
People who are unemployed between jobs
Cyclical Unemployment
General unemployment which follows the business cycle

12. Cyclical Unemployment
PRICE LEVEL
Arises during downturn/recession
Fall in AD actual GDP lies below potential GDP – negative output gap
Labour derived demand
Unemployment rises
AD1
LRAS
AD2 P1 Y2 Y1
REAL GDP

13. Classical Unemployment
Real Wage
Wage rate increases
More workers supply themselves QS
Firms demand QD
Unemployment QS-QD
ASL W2 W1
ADL Q1 QD QS
Employment

14. Armies of the Unemployed
What may be the social costs in the EU of high unemployment?