Edexcel A Level Economics A:复习笔记2.1.3 Employment & Unemployment

Measures of Unemployment


  • Someone is considered to be unemployed if they are not working but actively seeking work
    • They are part of the labour force
  • A country's population is divided into the labour force - and non labour force
    • The labour force consists of all workers actively working and the unemployed (who are seeking work)
      • Usually between the ages of 16-65
    • The non labour force includes all those not seeking work e.g. stay at home parents, pensioners, school children
      • Economically inactive are those people who are between 16-65 and not working or not seeking work
  • Unemployment in the UK is measured using two different approaches
    • The International Labour Organisation (ILO) Survey
    • The Claimant Count

The Differences Between the ILO Labour Force Survey & The Claimant Count

The ILO & UK Labour Force Survey The Claimant Count
  • An extensive survey is sent to a random sample of ≈ 60,000 UK households every quarter
  • Respondents self-determine if they are unemployed based on the ILO criteria
    • Ready to work within the next two weeks
    • Have actively looked for work in the past one month
  • The same survey is used globally so it's useful for making international comparisons
  • Counts the number of people claiming job seekers allowance (JSA) in the UK
  • More stringent requirement to be considered unemployed than with the ILO survey
  • Requires claimants to meet regularly with a 'work coach'

The Distinction Between Unemployment & Under-employment

  • Unlike the unemployed, people who are under-employed are working
  • Someone is under-employed when:
    • They want to work more hours than they currently work
    • They are working in a job that requires lower skills than they have e.g. an architect working as a gym instructor
  • Under-employment is often a response to cyclical unemployment
    • Workers who have lost their jobs in a weak economy are willing to take part-time jobs or accept roles outside of their main skill base
  • Under-employment is also a consequence of structural unemployment
    • Unless workers retrain and gain new skills, it will be hard for them to gain full employment

The Significance of Changes to Employment, Unemployment & Inactivity Rates

Four Metrics Are Commonly Used When Analysing the Labour Market in an Economy

Unemployment rate Employment rate
Labor force participation rate Inactivity rate
  • The employment rate could be increasing even as the unemployment rate is increasing:
    • May be caused by increased immigration which causes working age population to increase
    • May be caused by a decrease in the inactivity rate as people move from inactive to employed
  • Unemployment rates do not capture the hidden unemployment that occurs in the long term
    • Workers look for a job but may eventually give up and become economically inactive
    • This actually improves the unemployment rate as fewer people are actively seeking work

The Causes of Unemployment

  • Structural unemployment occurs when there is a mismatch between jobs and skills in the economy
    • It usually happens as the structure of an economy changes e.g. the secondary sector is declining and the tertiary sector is growing
    • There is no longer a need for a specific type of worker e.g. ship builders in Glasgow
    • Many Western industries have relocated production to China causing structural unemployment in their economies
    • Unless workers receive help to retrain, they are often left unemployed or under-employed
  • Cyclical or demand deficient unemployment is caused by a fall in AD in an economy
    • This typically happens during a slow down or recession
    • The demand for labour is a demand derived from the demand for goods/services
    • As output falls in the economy, firms lay off workers
  • Seasonal unemployment occurs as certain seasons come to an end and labour is not required until the next season
    • E.g. fruit pickers; summer seaside resort workers; ski instructors
  • Frictional unemployment occurs when workers are between jobs
    • This is usually short-term unemployment
    • Workers have voluntarily left their previous job to search for another
  • Real wage unemployment occurs when wages are inflexible at a point higher than the free-market equilibrium wage
    • Usually caused by the existence of minimum wage laws
    • The higher wage creates an excess supply of labour
    • This excess supply represents real wage unemployment

The Significance of Migration On Employment/Unemployment

  • Labour is a key factor of production and one way to expand output in an economy is to increase the amount of labour available
    • This is often achieved through easing the inward migration policies (immigration)
  • The UK has experienced significant immigration since the 1990's, especially from Eastern Europe
  • Net migration is the difference between inward migration and outward migration (emigration)
    • Less developed economies generally have net outward migration
    • More developed economies generally have net inward migration
    • More developed economies usually have skilled workers emigrating

Significance On Employment

  • The immigrants usually fill vacancies that the local citizens cannot (or will not) fill
    • These tend to be manual labour, dangerous, and low skilled jobs
  • The increased supply of labour may push down wages in the economy, especially for low skilled jobs
    • Lower average wages are an incentive for employers to hire more workers
    • Employment may increase as a result
  • Immigration results in an increased population which increases consumption in the economy
    • Greater output requires more labour so it creates more jobs

Significance On Unemployment

  • Immigrants may displace some local workers increasing the level of unemployment
  • Dependents of immigrants may be unable to find work and register as unemployed


The Effects of Unemployment

  • The effects of unemployment, especially long-term unemployment, are extremely damaging
    • There are impacts on the individual, the economy, the government, and firms


Long term unemployment affects individuals, the economy, government, and firms