COSTS AND BENEFITS OF ECONOMIC GROWTH REVIEW 4.3 COSTS AND BENEFITS OF ECONOMIC GROWTH

BENEFITS A rise in material living standards A rise in the welfare of the population A rise in employment A reduction in poverty

COSTS OF ECONOMIC GROWTH Environmental costs Congestion Loss of non-renewable resources A lower quality of life Inequalities of income and wealth Inflation

EMPLOYMENT/UNEMPLOYMENT REVIEW 4.4 EMPLOYMENT/UNEMPLOYMENT

Full employment – When all those able and willing to work are in paid employment at the current wage rates. Unemployment – When workers who are able and willing to work are unable to find employment (at the current wage rates) Full employment may also be the lowest value before inflation starts to accelerate. (NAIRU = Non accelerating Inflation Rate of Unemployment) Unemployment Inflation 3 million 2% 2 million 2.5% 1 million 3% 0.5 million 3.5% - NAIRU .25 million 8%

Measuring Unemployment 1. Claimant Count – Measures unemployment according to the number of people claiming unemployment – related benefits. 2. Labour Force Survey – A survey of a sample of households, counting people as unemployed if they are actively seeking work but do not have a job. WHAT ARE THE TYPES OF UNEMPLOYMENT? 1. Voluntary 4. Structural (most serious) 2. Seasonal 5. Technological 3. Frictional 6. Cyclical

Cures 1. Voluntary – reduce benefits and/or raise minimum wage. 2. Seasonal- Improve mobility of workers 3. Frictional – None 4. Structural – Re training 5. Technological – Embrace new technology 6. Cyclical – Wait for the ‘boon’ to return.

What are the consequences of unemployment? Labour resources are wasted Lower living standards Excluded workers Costs to tax payers A budget deficit Regional problems Social problems How the government fixes unemployment 1. Fiscal 2. Interest Rates 3. Supply side