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P.43. The attainment of full employment, p.669.

Defn.- people who are on working age, but out of work and seeking work.

Different measures. Regional differences and difference in skills. 8.0% in UK. Beveridge definition of full employment- 3%. Also comparing with vacancies. Govn now ensures that people are seeking for work. UK had 0.9% unemployment in 1960 and increased immigration.

0-unemployment + no expansion available, causes inflation.

Full employment - no. of vacancies = no. of people out of work.

Types: 1. Frictional - people between jobs (e.g. women coming back)

2. Seasonal

3. Residual (natural) - people registered, but unwilling to work (e.g. sick)

4. Structural - decline in an industry (coal, steel)

5. General, cyclical(trade cycle)- general depression in the economy, nowadays not so periodical

6. Technological - inevitable, because goods must be produced cheaply.

7. Regional - in the north west of England the difference diminishes

Arguments for regional policy

1. The failure of market forces - markets will not work quickly, more clever people will move leaving even worse situation behind

2. Cumulative decline - history of trade unions discourages new firms to enter

3. Inflationary pressures if national measures (e.g. fiscal policy) are taken

4. social costs also included (unlike in the case of private firms)

Arguments against

1. Inefficient units of production

2. Destroys comparative advantage

Government policies

workers to the work - relocation grants. Congestion in popular areas, people left behind become worse off.

work to the workers - very expensive, not effective in terms of multiplier.

Unemployment in recent years-highest in 1986 by 3.2m or 12%. As workforce rises both employment and unemployment rise. Men over 60 not anymore unemployed.

Unemployment is with world-wide pattern. One nation cannot step out. USA has less because tax cuts and budget deficit(Japan too). (West) Germany and France have very high unemployment.

Definitions and causes of unemployment

1. Deficiency of aggregate demand- Keynes, demand pull. Fighting against to boost economy uses:

Fiscal policy(reduce tax increase spending), monetary policy(lower interest), Incomes policy(to restrain inflation while using fiscal), protectionism to prevent import workforce(against Japan as well). Keynes' blame for 1930ies. Ideas of labour and liberals. Edward Heath was last prime minister in 1979 to support this (conservative, but used demand management. Big disagreement with Thatcher).

2. Increase in structural and frictional unemployment - rise in social security benefits, harder to make people redundant

3. International aspects - too high exchange rate and USA depression. To fight against use protectionist measures.

4. Oil prices-(4x in 1973, 1978) unemployment and gold price rocketed

5. Technology

6. Government policy - main aim is inflation

7. Pound rising unemployment rising

8. Lack of competitiveness & Ineffective supply (conservatives)- supply side unemployment. Policy against includes:
a. Reduced welfare payments(unemployment benefits) to encourage people to work
b. lower levels of direct taxation
c. Make producers produce as cheaply as possible and to be as competitive as possible.
d. reduction of employee and trade union rights' that resist new technology
e. abolition of wage floors
f. the promotion of training
g. Reduce direct taxation and selective tax (not now was 2 per head to move workers from service)
h. EC wants a fair minimum wage
i. Training schemes - makes labour more skilled and productive, moves MRP out.
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