Exercises: Unemployment and poverty

Define the unemployment rate. A country has a labour force of 2,500,000 people, of whom 2,350,000 are employed. Calculate the unemployment rate.

Match each of the following to a type of unemployment (frictional, structural, cyclical, seasonal):

1. a) A graduate searching for her first job.

1. b) A farm worker laid off after the harvest.

1. c) A fall in aggregate demand during a recession.

1. d) A bank clerk whose job has disappeared due to online banking.

State three economic costs and three social costs of unemployment for individuals and for the economy.

In year 1, the labour force is 2.4 million and unemployment is 190,000. In year 2, the labour force is 2.5 million and unemployment is 150,000.

1. a) Calculate the unemployment rate in each year.

1. b) Calculate the number of people employed in each year and the change.

1. c) Explain why unemployment can fall while the labour force grows.

A firm closes a factory in Waterford, making 400 workers redundant. Each receives a jobseeker's payment of €220 a week and previously paid income tax of €90 a week.

1. a) Calculate the weekly cost to the Exchequer of the closure (extra welfare plus lost tax).

1. b) Calculate the annual cost over 52 weeks.

1. c) Describe two further effects on the local economy via the multiplier.

Explain the link between long-term unemployment and poverty. In your answer, refer to income, skills depreciation, intergenerational effects and the "at risk of poverty" concept. Outline two policies to address it.

Evaluate policies that the Irish Government could use to reduce (i) cyclical unemployment and (ii) structural unemployment. In your answer, consider fiscal policy, education and training, and active labour market programmes, and discuss the trade-offs with inflation and public finances.

The unemployment rate is 5%, but the participation rate has fallen and many workers have emigrated or become discouraged.

1. a) Explain why the headline unemployment rate may understate the true extent of labour market weakness.

1. b) Calculate: labour force 2,000,000; unemployed 100,000. If 50,000 unemployed people become discouraged and leave the labour force, calculate the new unemployment rate.

1. c) Discuss the usefulness of the unemployment rate as an indicator of economic wellbeing.

Discuss the extent to which a rise in unemployment benefits would affect (i) poverty rates, (ii) the incentive to seek work, (iii) aggregate demand and (iv) the public finances. Reach a reasoned conclusion on whether such a rise is desirable.