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Unemployment: Témakör 3 Téma 4 1
Unemployment: Témakör 3 Téma 4 1
Téma 4
Unemployment
Unemployment is concerned with people being out of work. The maintenance of full
employment is a central policy aim of governments, but it has been accepted that there is
some level of unemployment below which it is not possible to go without the return of
inflationary pressure. Any attempt to control the level of employment is further complicated
by changes in the size of the labour force.
Measuring unemployment
It is possible to measure unemployment in various ways. In the UK, unemployment has been
measured by the number of people claiming unemployment-related benefits. To claim
benefits people must declare that they are out of work and be capable of, available for and
actively seeking work during the week in which the claim is made. This is known as the
claimant count measure. One problem with this measure is that it does not include people
who are unemployed but who do not register.
In the late 1990s the UK government indicated that it wanted the main measure to be the
International Labour Force (ILO) measure of unemployment. This is based on a survey of
people. To be unemployed a person has to be out of work, have looked for work in the last
four weeks and be able to start work in the next two weeks.
Types of unemployment
Search and frictional unemployment: These two types of unemployment are very similar.
FRICTIONAL unemployment occurs when people are moving between jobs. Usually it only
lasts for a short amount of time. For example, an electrician who had been working in the
North East may have a few weeks `off' before starting a new job in London. It is not seen as a
serious problem by government. SEARCH unemployment, however, can last longer. This
type of unemployment occurs when people are searching for a new job. The greater the
information on job opportunities, the lower search unemployment is likely to be.
linked with regional unemployment. It may also result from changes in demand for the goods
and services produced by particular sectors of the economy. For example, there has been a
decline in demand for natural fibres such as jute as a result of the development of synthetic
products.
Technological unemployment: This occurs when new technology replaces workers with
machines. For example, new technology introduced to the newspaper industry has meant the
loss of many print workers' jobs.
Real wage unemployment: High real wages mean that workers will want to supply more
labour than businesses want to employ. This results in unemployment. In other words, it is
argued that workers price themselves out of jobs. There are vacancies, but businesses will
only be willing to pay wages which are lower than workers are prepared to accept.
Unemployment due to obstructions to the labour market: Monetarist believe that this is
the major cause of long term unemployment. They see the excessive bargaining power of
trade unions as being especially important. They believe that workers are then priced out of
work by excessive increases in real wages. They also see excessively high unemployment
benefit as a cause of longer search time, thus increasing the number of unemployment at a
given time.
Alternatively, the government might reduce the real value of benefits in order to make
jobs on low wages more attractive. It might also reduce the higher rates of taxes on
income and profits to encourage entrepreneurial activity and so encourage job
creation.
Where specific industries or regions are worst affected, it might use a policy of direct
subsidy and regional aid measures in order to maintain existing jobs in the short term
whilst encouraging the creation of new job.