Teaching and Learning Notes for the role of the financial market in GCE A-Level Economics

1. Employment and Unemployment
GCE A-LEVEL & IB ECONOMICS

2. Lesson Structure
Employment & Unemployment
o What is Unemployment
o Types of Unemployment
o Effects of unemployment
o Measures of Unemployment
o Underemployment
o Significance of Migration and Skills

3. What is it like to be Employed?
For anyone who was employed before, what was your job? How was
it like? What did you learn?

4. Wrong Definition of Unemployment

5. Definition of Unemployment
Unemployment is defined as the percentage of the labour force that is _______
and _________ to work, is _________________ employment, but is unable to
find work.

6. Causes of Unemployment
Would anyone like to suggest reasons why workers are unemployed?

7. Causes of Unemployment
◦ _________ unemployment is when there
is no work available for workers at
particular times of the year
◦ Common in industries such as tourism,
retail and farming
◦ Can distort unemployment figures, so
some statistics are seasonally adjusted

8. Causes of Unemployment
___________ unemployment occurs when there is a mismatch of skills of
workers and available jobs in the economy
This usually happens when there are large shifts in the economy. E.g. people
moving from the agricultural sector to manufacturing sector as the country
develops
A solution for this may be to retrain workers and equip them with new skills but
that may take years...

9. Causes of Unemployment
Automation taking over jobs video:
https://www.youtube.com/watch?v=WSKi8HfcxEk

10. Causes of Unemployment
◦ _________ unemployment occurs when
workers are switching between jobs
◦ This can be for a change in location, career
progression or career moves
◦ Considered natural for economies to some
extent, and is due to the lack of perfect
information or the right job available

11. Causes of Unemployment
◦ _________ unemployment happens
when the economy is in recession
◦ During a recession, consumption
decrease due to economic uncertainty.
This causes lower demand for goods in
the economy, lower output from firms,
and they hire less as a result. (more on
this later)

12. Causes of Unemployment
◦ “Real Wage Inflexibility” is when
wages in the labour market is higher
than the equilibrium wage
◦ This can be due to labour unions or
the minimum wage causing wages to
be artificially high
◦ This leads to unemployment as it
increases the number of people
looking for jobs but decreases
number of workers hired since firms
may not be able to afford it

13. Types of Unemployment
Which of the following is most likely to be an example of frictional unemployment?
a) Gill lost her job as a television engineer two months ago and is waiting to start a new job
next month
b) Brian has not worked for 15 years since losing his job as a coal miner
c) Hitesh lost his job as a construction worker six months ago when a recession led to a
downturn in the construction industry
d) Faith works in the hotel trade as a casual chef and spends November to April out of work

14. Types of Unemployment
Structural unemployment is most likely to be caused by
a) a recession in the economy
b) changes in the demand for labour at different times of the year
c) an increase in the number of people changing jobs
d) the skills of the unemployed not matching those skills required for the available jobs

15. Effects of Unemployment
We will watch a short part of this video:
https://youtu.be/cXQrbxD9_Ng?t=420
What do you think are effects which unemployment can have on
- Workers
- GDP
- Government Budget
- Firms
Discuss with your neighbour and share an effect on each party

16. Effects of Unemployment
Workers
- Skills deteriorate over time, lower living standards, social costs
GDP
- Loss in potential output by workers will mean lower GDP
Government Budget
- Higher spending on welfare, lower tax revenues from incomes
Firms
- Lower productivity, lower profits (due to lower consumption when
people do not have income from employment)

17. Measuring Unemployment
Unemployment seem
undesirable, so we should
measure its impact.
But how do we Measure
unemployment in the
economy? Any ideas?

18. Measuring Unemployment
Split into two groups. One group look up the Job Seeker’s Allowance (JSA),
another look up the Labour Force Survey (International Labour Organisation).
Share what it is that you have looked up.
How can you use what you looked up to measure unemployment?
What is a strength or limitation of your measure?

19. Limitations of these Measures
Claimant Count of the Job Seeker’s Allowance (JSA)
- Not all those unemployed may/can claim (e.g. under 18s / over 60s)
- Criteria for the eligibility of JSA tend to change over time
- Claimants may not actively be seeking work or may already be working in the black economy
Labour Force Survey
- Generally more accurate but costly to compile & implement
- Still uses a limited sample of the unemployed, so is prone to sampling error or bias

20. Underemployment
Take 5 minutes to read this article (search “guardian graduate into
underemployment”
https://www.theguardian.com/education/2014/sep/30/graduate-into-
underemployment

21. Underemployment
What is underemployment?
Why is it an issue when underemployment is difficult to be shown in
unemployment figures?

22. Global Labour Shortage in 2020s/30s
https://www.bcg.com/publications/2014/people-organization-
human-resources-global-workforce-crisis.aspx

23. Labour Migration
◦ One way to solve the issue of skills mismatch and shortage of labour is to
immigrate workers from other countries
◦ This relies on the removal of migration barriers which will lead to higher
geographic mobility of labour
◦ Certain requirements can be set on workers e.g. particular professions, high
skilled labour etc
◦ For the UK, a large number of skilled and unskilled labour comes from the EU.
Brexit may possible affect this
◦ A lack of labour can cause gaps in the labour market. This drives up wages and
increase cost of particular goods and services requiring that labour.

24. UK Employment Trends
Homework:
Draw 3 insights on UK employment trends from the ONS employment statistics
https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemploye
etypes/bulletins/uklabourmarket/december2018