2281 · 4.7
Employment and unemployment flashcards
Revision flashcards for Cambridge 2281 Employment and unemployment (syllabus 4.7). Flip, recall, then mark a real past-paper question.
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Define unemployment.
People of working age who are without work, available to start within two weeks, and actively seeking employment.
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Four types of unemployment?
Frictional (between jobs), structural (skills/location mismatch), cyclical/demand-deficient (insufficient AD), seasonal (off-season industries).
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Unemployment rate formula?
Unemployment rate = (Number unemployed ÷ Labour force) × 100%, where labour force = employed + unemployed.
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Claimant count vs ILO/LFS?
Claimant count: those receiving unemployment benefit (understates). ILO/LFS: internationally comparable survey based on seeking work (preferred measure).
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Natural rate of unemployment?
The rate at full employment (Yf) — includes frictional and structural unemployment but not cyclical. Also called NAIRU.
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Policy for cyclical vs structural unemployment?
Cyclical: expansionary fiscal/monetary to boost AD. Structural: education, retraining, relocation grants, supply-side reform.
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Define the Labour Force Survey (LFS) measure of unemployment.
A household survey that measures unemployment based on the ILO definition: an individual is unemployed if they are without a paid job, have been actively seeking work in the past four weeks, and are available to start work in the next two weeks.
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What is demand-deficient (or cyclical) unemployment?
Unemployment that arises from a general lack of aggregate demand in the economy, typically occurring during a recession. As firms reduce output due to falling sales, they require fewer workers, leading to redundancies. It is associated with a negative output gap.
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Explain structural unemployment.
Long-term unemployment caused by a mismatch between the skills of the workforce and the requirements of new job opportunities. It often results from the decline of major industries (de-industrialisation), technological advancements, or increased international competition.
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What is the Natural Rate of Unemployment (NRU)?
The rate of unemployment that exists when the labour market is in equilibrium and the economy is producing at its full-employment level of output. It consists of frictional, structural, and seasonal unemployment. It is sometimes called non-accelerating inflation rate of unemployment (NAIRU).
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Distinguish between demand-side and supply-side policies to reduce unemployment.
Demand-side policies (e.g., lower interest rates, higher government spending) aim to boost aggregate demand to tackle cyclical unemployment. Supply-side policies (e.g., training schemes, benefit reforms) aim to improve the flexibility and efficiency of the labour market to tackle structural and frictional unemployment.