2.1.3 Employment and Unemployment (Edexcel)

Overview

This Edexcel study note covers various aspects of employment and unemployment, focusing on methods of measurement, distinctions, significance, causes, effects, and the role of migration and skills.

a) Measures of Unemployment

• Claimant Count
  • Measures unemployment by counting individuals receiving unemployment-related benefits, such as Jobseeker's Allowance.
  • Provides a narrow view as only those actively seeking and receiving benefits are included.
• International Labour Organisation (ILO) and UK Labour Force Survey
  • ILO defines unemployment as those without work, actively seeking, and available for work.
  • The UK Labour Force Survey is the main data source, offering a broader picture by including those not eligible for benefits.

b) Unemployment vs. Under-Employment

• Unemployment: Individuals without a job, actively seeking and available for work.
• Under-Employment: Employed individuals whose jobs do not fully utilize their skills and qualifications, often leading to part-time work or low wages.

c) Significance of Employment, Unemployment, and Inactivity Changes

• Employment Rate: Proportion of working-age population in employment; growth indicates economic strength.
• Unemployment Rate: Proportion of labor force seeking work; high rates suggest economic issues.
• Inactivity Rate: Proportion not in the labor force; suggests lack of opportunities or demographic issues.

d) Causes of Unemployment

• Structural Unemployment: Mismatch between workforce skills and job requirements.
• Frictional Unemployment: Temporary, when individuals are between jobs.
• Seasonal Unemployment: Relates to seasonal demand, e.g., agriculture.
• Demand Deficiency (Cyclical) Unemployment: Due to lower aggregate demand during downturns.
• Real Wage Inflexibility: Wages too high, leading to job cuts or hiring reluctance.

e) Role of Migration and Skills

• Migration:
  • Affects labor supply; can fill gaps but may pressure wages.
• Skills:
  • Essential for adaptability and reducing unemployment in economic shifts.

f) Effects of Unemployment

• Consumers: Reduced income, decreased spending affects businesses.
• Firms: Larger labor pool, potentially reduced wages.
• Workers: Loss of income, job prospects, psychological stress.
• Government: Increased benefit spending, reduced tax revenue, social issues.
• Society: Social unrest, reduced well-being, inequality.

Real-World Example

• 2008 Financial Crisis:
  • Structural unemployment rose as workers in declining sectors struggled to shift to growing sectors, highlighting the need for retraining.

These notes summarize the key elements related to employment and unemployment, as per the Edexcel syllabus.