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What is full employment? When everybody seeking work is employed at existing wage rates
What are the positive consequences of full employment? Increased standard of living (More disposable income) Increased government revenues (Income tax and VAT) Reduced social welfare bill Increased aggregate demand
What are the negative consequences of full employment? Inflationary pressures (Demand pull) Possible labour shortages Pressure on infrastructure Deterioration or loss of services
What is unemployment? All those seeking work at existing wage rates but unable to find work
What are the types of unemployment? Frictional Seasonal Cyclical Structural Institutional
What is frictional unemployment? Reduction in the demand for labour in a particular occupation although jobs are available in other occupations/firms
What is cyclical unemployment? Reduction in the demand for goods and services during an economic recession
How can unemployment be measured? The live register QNHS Census
Which measure of unemployment is the most accurate (Live register or the QNHS)? The QNHS is a better measure as it excludes people who legally sign and work simultaneously and it also excludes those who sign on but are not seeking employment. It also includes those who are unemployed but do not receive social welfare
What are the causes of unemployment? Recession (Cyclical unemployment) Relocation of industry Value of currencies Uncertainty
What is the impact of unemployment on the Economy? Decrease in consumer demand Falling inflation or deflation Increased Government expenditure (Social Welfare) Decreased Government revenue (PAYE, VAT) Greater tax burden on the employed Increased social problems Wage increases not sought
What are the strategies for reducing unemployment? Decrease taxation - More spending in the economy Maintain low rate of corporation tax Subsidise additional labour Reduce costs for business Capital investment by government Investment in education and training Encourage import substitution
What are the effects of job sharing? Fewer people on social welfare Less absenteeism Lower tax revenue Fewer imports Social problems decrease
What is underemployment? A situation whereby a factor of production though not actually unemployed is working below capacity
Why is FDI so strong in Ireland? Skilled labour force English speaking workforce Low corporation tax rates Access to EU market State incentives Good industrial relations
Why do MNC's exit Ireland? Lower wage costs abroad Skills mismatch Rising costs of production Advances in communications
What are the advantages of lowering the minimum wage? Lower labour costs Lower selling prices Increased demand Reduced risk of relocation
What are the disadvantages of lowering the minimum wage? Reduced standard of living Reduced aggregate demand Discourages employment Burden on low income workers
What is the black/shadow economy? All economic activity that goes unrecorded in the national income accounts
What are the effects of the black/shadow economy? Loss of tax revenue Decline in legitimate business activity Increased Government expenditure on enforcement Presssure on state finances Standards of goods not regulated
What are the strategies to discourage black/shadow market activity? Reduce direct taxation Reduce indirect taxation Better enforcement Educate public on importance of tax revenue