Essay: Explain the reasons for the changes in unemployment in the UK in the last 10 years. Edexcel (10)

According to the claimant count, which measures the number of people on JSA, unemployment has fallen from approx 3 million in 1993 to 1 million in 2003. The Labour force survey is slightly higher at the moment it is about 5% of the workforce higher then the CC (3%).

Unemployment is caused by a variety of factors e.g. frictional, structural, cyclical, real wage and voluntary unemployment.

Since 1993 the economy has experience strong economic growth due to rising AD, as output increase firm demand more workers therefore there has been a big fall in cyclical unemployment. The Bank of England has used Monetary policy effectively to keep inflation low but also ensure stable economic growth.

Also it is arguable that the natural rate of unemployment has fallen, for example supply side policies have made the labour market more flexible. E.g. lower taxes and benefits have increased the incentives to work. (Benefits have been index linked, this means that they rise in line with inflation and therefore fall behind wages)

In the 1980s the power of trades unions reduced for both economic and political reasons; therefore there is less real wage unemployment, as unions are not able to keep wages above the equilibrium for a long time.

There has been significant structural change in the UK economy, the manufacturing sector has declined relatively this may have caused some structural unemployment due to mismatch of skills. However, there has been growth in other areas such as the service sector eg. IT. Therefore, there have been many new jobs created



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