The Natural rate of unemployment is mainly composed of frictional and structural unemployment. Therefore, factors that affect these types of unemployment will alter the natural rate. It is argued the level of unemployed benefits can affect frictional unemployment. If the ratio of benefits to paid employment is high, then there is little incentive to take …
The natural rate of unemployment occurs when the labour market is in equilibrium; it is mainly composed of frictional and structural unemployment. The natural rate of unemployment is affected by supply-side factors such as geographical/occupational immobilities and labour market imperfections. Firstly, it is argued the level of unemployment benefits can affect the level of frictional …
Classical unemployment occurs when real wages are kept above the market-clearing wage rate, leading to a surplus of labour supplied. Classical unemployment is sometimes known as real wage unemployment because it refers to real wages being too high. Diagram Showing Classical Unemployment Classical Unemployment = Q3-Q2. In a free market, the quantity of labour would …
Demand deficient unemployment occurs when there is insufficient demand in the economy to maintain full employment. In a recession (a period of negative economic growth) consumers will be buying fewer goods and services. Selling fewer goods, firms sell less and so reduce production. If firms are producing less, this leads to lower demand for workers …
In the UK there are two main measures of unemployment – The claimant count (number receiving unemployment benefits) ILO – Labour Force Survey (A survey which asks – are you unemployed and actively seeking work?) Graph showing unemployment levels UK Unemployment In recent years, the gap between the labour force survey and the claimant count …
Technological unemployment occurs when developments in technology and working practices cause some workers to lose their jobs. Technological unemployment is considered to be part of a wider concept known as structural unemployment. Example of technological unemployment When labour-saving machines are introduced into the productive process, a firm can get rid of workers and produce the …
The claimant count records the number of people receiving unemployment benefits from the government. In the UK, the claimant count currently measures everyone who receives Job Seekers Allowance (JSA). To receive JSA, the applicant must be actively seeking work and provide evidence and commitment of efforts to find work. The claimant count method is one …
Involuntary unemployment is a situation where workers are willing to work at the market wage or just below but are prevented by factors beyond their control. These factors could include deficiency of aggregate demand, labour market inflexibilities, implicit wage bargaining and efficiency wage theory. In Keynesian theory, involuntary unemployment is associated with insufficient aggregate demand …