Theme 2- The UK economy

Employment and unemployment and balance of payments

2.1.3 Employment and unemployment

-The two measures of unemployment are the claimant count and the labour force survey.

-The claimant count is the number of people claiming benefits in an economy.

- This figure tends to be less reliable as some individual might resist on claiming benefits due to pride
or embarrassment reasons, as well as that there could be individuals that could be potentially
claiming benefits illegally meaning they are not necessarily entitled to the fund but claim for
personal benefits.

-The labour force survey is the number of individuals from the age of 16 to 65, this measures the
number of people that could be working but aren’t working.

-This also has negatives as it considers individuals from the age of 16 this could mean a larger
number of people.

-Underemployment is the term given to individuals who are actively seeking for work and are willing
to work in the following weeks ahead.

-Under-employment is the term given to those that have a job but aren’t working as many hours as
they are wanting to work. This could be a job that requires fewer hours of work. In this case many
individuals would want more hours but won’t be getting them. Initially this is what under-
employment means.

-If the rate of employment rises this could mean the rate of unemployment would fall, as a result of
this the government would have to spend less on benefits and could spend on other things like
education and health care. In addition, to this as the rate of employment increases this could also
mean the spare capacity in the economy is being used up, this is a good sign as the factors of
production and being utilised to their maximum point.

-However, as employment increases this could mean inflation could rise as household income could
be increasing which could mean AD shifts outwards leading a higher general price level.

-As the rate of unemployment falls this could mean fewer funds need to be used to pay for benefits
however as the unemployment rate falls this could mean inflation could occur.

-Inactivity is the term given to someone who is willing to work but is inactive due to someone else
for example taking care of an elderly leaves you with no option but to work at a job that allows
working from home.

There are 5 types of unemployment-

Structural unemployment- this is when individuals have skills that are the opposite for the
requirements for the job. Initially meaning the mismatch of skills.

Frictional unemployment- This is when workers move between one job and another.

Seasonal unemployment- This occurs when good and services are only demanded at a certain time
in the year meaning at all times in the year the individuals would be suffering from unemployment.
For example, ice cream van, this is mainly demanded during summer times and business
performance tends to be quiet flat at other times in the year.

-Cyclical unemployment – This is unemployment that has occurred due to chances in the economic
growth. For example, a recession occurring or even shock to the economy for example the COVID 19
pandemic.

-Real wage inflexibility-

-Migration- this is the term given to both emigrants and immigrants.

-Migration is essential for an economy this is because it enables the country to allow more skilled
individuals to enter the country. However, we could argue the money people that enter from abroad
could result in difficulties to find work as jobs would be occupied. As well as this those coming from
abroad might be willing to work on low pay this could mean employers priorities workers from
abroad because they effect the business costs less.

-Unemployment on consumers –

-Unemployment on firms-

-Unemployment on workers-

-Unemployment on the government-

-Unemployment on society-