Should low inflation be the primary objective of economic policy?

Should low inflation be the primary objective of economic policy?

The UK government has given the Bank of England an inflation target of CPI 2 % +/-1. The Bank of England is responsible for using monetary policy (e.g. interest rates)  to achieve this goal of low inflation. But, as well as targeting inflation, the Bank of England also has a wider remit of considering objectives such as economic growth.During 2008 and 2010 the UK had inflation above the target as Bank of England were more concerned about recession Summary – Should we…

Reasons for Youth Unemployment

Reasons for Youth Unemployment

A look at the economics reasons for high youth unemployment (16-25) in the UK.During the recession, youth unemployment rose at a faster rate than the main unemployment rate.  After peaking at 20% (1 million) in early 2012, youth unemployment has recently fallen to 12 % (2017) The reasons for youth unemployment are fairly similar to other causes of unemployment. They include:Lack of qualifications. Young people without any skills are much more likely to be unemployed (structural unemployment) A…

UK unemployment-rate

UK Unemployment Stats and Graphs

A selection of graphs and statistics on UK unemployment. Also, looking at factors that explain UK unemployment and why unemployment has fallen in recent years.Raw data:  Labour market data | Source: ONS MGSX (LFS) Current UK Unemployment rateUnemployment rate of 4.3%, (Oct 2017) –  (UK Unemployment at ONS) 1.45 million unemployed people. (ONS)Employment ratesEmployment rate: 75.3% (proportion of people aged 16-64 in work) – ONS Employment:  32.136 million people in work.Participation…


Impact of Immigration on UK Economy

In the past two decades, the UK has experienced a steady flow of net migrants into the economy. This net migration has had a wide-ranging impact on UK population, wages, productivity, economic growth and tax revenue. To what extent does net migration benefit the UK economy?International Migration ONSIn 2016, Net long-term international migration was estimated to be +248,000 in 2016. Immigration was estimated to be 588,000 and emigration 339,000. 9,634…

Trade off between unemployment and inflation

Trade off between unemployment and inflation

A look at the extent to which policymakers face a trade-off between unemployment and inflation. The Phillips curve suggests there is a trade-off between inflation and unemployment, at least in the short term. Other economists argue the trade-off between inflation and unemployment is weak. Why is there a trade-off between Unemployment and Inflation?If the economy experiences a rise in AD, it will cause increased output. As the economy comes closer to full employment, we also experience a rise in inflation. However, with the increase…


The True Level of Unemployment in UK

Readers Question: To what extent do the official UK figures for unemployment accurately reflect economic reality?Summary The government publish two unemployment statistics – the Claimant count and Labour Force Survey.The Labour Force survey asks 60,000 people whether they are actively seeking work. The claimant count is the number of those receiving job seekers allowance.The labour force is a better guide to unemployment because the claimant count only includes those eligible for benefits. Another factor to consider is the extent of disguised unemployment. This is when people are not counted as…


The Luddite Fallacy

The Luddite fallacy is the simple observation that new technology does not lead to higher overall unemployment in the economy. New technology doesn’t destroy jobs – it only changes the composition of jobs in the economy. Historical background The Luddites were a group of English textile workers who violently destroyed machines. They broke up power looms because they feared that these new machines were taking their jobs and livelihoods. Against the backdrop of the economic hardship following the Napoleonic wars, new automated looms meant clothing could be made with fewer lower-skilled workers….

Does inflation cause unemployment?

Readers Question: Does inflation causes unemployment? There are a few different scenarios where inflation can cause unemployment. However, there is not a direct link. Often we will notice a trade-off between inflation and unemployment – e.g. in a period of strong economic growth and falling unemployment; we see a rise in inflation – see Phillips Curve. Also, it is important to bear in mind, (especially in the current climate) If the economy has deflation or very low inflation and the monetary authorities target a modest rate of inflation,…