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Transcript of Local & Regional Economics Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b 1...
Local & Regional Economics
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
1
Unemployment Disparities
Local & Regional Economics
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RELOCE - Lecture 5b
Last lecture: - Inter regional labour migration
This lecture: - Unemployment Disparities
Aims Examine why unemployment disparities persist Look at types of unemployment Discover who is likely to be unemployed Examine the issue hidden unemployment
Objectives To understand why regional economists study unemployment
To be able to identify the main issues Regional and Local Economics (RELOCE)
Lecture slides – Lecture 5b
Local & Regional Economics
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Important questions for economists
Why do regional unemployment disparities occur and persist?
Why do some towns and cities have higher rates than their suburbs and rural hinterland?
What’s the link between unemployment and regional policy?
1933 1999North East 127.4
(29.8%)156.5(9.7%)
South East 72.6(17%)
62.9(3.9%)
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
Local & Regional Economics
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Unemployment disparities exist within as well as between regions
Armstrong & Taylor find wide variations in unemployment in Europe
Similar situation in the UK wide fluctuations within regions
Was the recession of 1990-92 a turning point? Same number of jobs lost in south as in the previous
recession but less lost in north Shake-out from unsustainable service sector boom in
south Service-sector employment boom more subdued in the
north North’s industrial base already slimmed-down and efficient
East Sussex 6.6% Tyne & Wear 2.2%
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
Local & Regional Economics
Regional and Local Economic Analysis (RELOCE) Lecture slides – Lecture 10
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Highest Rate % Lowest Rate % Range Median South West Penwith 4.3 North Dorset 0.7 3.6 1.7 Eastern Great Yarmouth 4.9 South Cambridgeshire 1.0 3.9 2.0 East Midlands Bolsover 5.0 Rutland 0.6 4.4 2.2 West Midlands Birmingham 5.4 Stratford-on-Avon 1.1 4.3 2.1 South East Thanet 6.2 Mole Valley 0.6 5.6 1.4 Yorkshire & Humberside Kingston upon Hull 6.3 Craven 1.1 5.2 3.1 Wales Blaenau Gwent 6.7 Powys 1.8 4.9 3.4 North West Knowsley 8.1 Ribble Valley 0.8 7.3 2.6 North East South Tyneside 8.2 Castle Morpeth 2.1 6.1 4.7 Scotland West Dunbartonshire 8.3 Aberdeen City 1.5 6.8 3.8 Northern Ireland Strabane 9.0 Ballymena 2.5 6.5 4.4 London Lewisham 9.7 City of Westminster 0.8 8.9 3.9
Local & Regional Economics
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Why is the LM adjustment process so slow?
Wages are unresponsive to excess supply
National negotiations
Decentralised management functions
Mobility constraints
Employers caution
Minimum Wage
Proportion of small firms
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
Local & Regional Economics
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Types of unemployment
Frictional unemploymentJobs available for
unemployed
Takes time to match workers to jobs and jobs to workers
Levels high in boom low in slump
Some sectors experience high level of churning
Structural unemploymentUnemployment and
vacancies coexist
Mismatch between skills and jobs
Reasons - technological change; changes in consumption; production transfer
Long-term chronic in slum re-training in boom
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
Local & Regional Economics
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Measuring frictional and structural unemployment
Unemployment/Vacancy ratio Portsmouth TTWA, Oct 2000
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Ser
vice
Occ
up
atio
ns
Frictional
Per
son
al/P
rote
ctiv
e
Sal
es O
ccu
pat
ion
s
Occ
up
atio
ns
Op
erat
ives
Occ
up
atio
ns
Cle
rica
l/Sec
reta
rial
Pla
nt/
Mac
hin
e
All
occ
up
atio
ns
Man
ager
s/A
dm
inis
trat
ors
Cra
ft/R
elat
ed
Oth
er O
ccu
pat
ion
s
Pro
fess
ion
al
Ass
oci
ate
Structural
Occ
up
atio
ns
Pro
fess
ion
al/T
ech
nic
al
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
Local & Regional Economics
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Demand for labour, supply of labour
Real wage
n* n2n1
Unemployment
w*
w1
S
S
D
D
1. Real wages too high
2. Influenced by, unions, benefit levels, minimum wage
3. Solution neuter TUs, cut benefits, abolish minimum wage
4. Lower real,wages induces employers to take on staff, invest and increase capacity
Neo classical unemployment
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
Local & Regional Economics
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Demand deficient unemployment
Demand for labour, supply of labour
Real wage
n*n2n1
Unemployment
w*
w1
S
SD’ D
D’ D
1. Severe decline in national demand
2. Transmitted to all regions
3. Unemployment reduced by increasing aggregate demand
4. Use regionally discriminating taxation and expenditure
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
Local & Regional Economics
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U - V relationship over time
I
II
III
Vacancies
Unem ploym ent
S
S D
D
E
E
W *
W 2
W 1
A B C
E
F G H
Real Wage
Em ploym ent
D
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
Adapted from Armstrong and Taylor (2000) pp 183
Local & Regional Economics
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Characteristics of the Unemployed
Aged under 25 (particularly females)
Non white
Low educational attainment
Unskilled (males) Skilled & Partly-skilled (Fem)
Unmarried
In rented accommodation
Working in construction
No fixed job or occupation
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
Local & Regional Economics
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DoE Registered
unemployment
161,300
Census
unemployment
178,300Gov. Schemes
30,400
Sick
87,700
Early retirement
22,200
Real unemployment
318,600
Real levels of coalfield unemployment
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
Adapted from Fothergill and Beatty
Local & Regional Economics
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Unemployment and sickness Extended study by Beatty and Fothergill published in 2000 in
Regional Studies. At the core of the theory is the notion that long-term sickness is
widespread in the workforce. Draws on the concepts of “hidden sickness”, the “queue for
jobs” and hidden unemployment. Based on empirical observations in UK and shows how job
losses translate into higher recorded sickness. They find that the process varies between locations.
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b
Local & Regional Economics
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Source: Fothergill and Beatty, Fig 3, Regional Studies 34.7 pp622 Regional and Local Economics (RELOCE)
Lecture slides – Lecture 5b
Local & Regional Economics
Regional and Local Economic Analysis (RELOCE) Lecture slides – Lecture 10
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Note the dark shaded areas are predominantly areas dependant on heavy industry and coal
Fothergill and Beatty’s article is available on the “L” Drive
Local & Regional Economics
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Conclusions Important issue. Supply-side economists suggest
unemployment disparities could be reduced by increased labour market flexibility
Keynesian economists suggest difficult to reduce labour market frictions must manage demand spatially
Truth is out there somewhere between the two extremes
Concept of hidden unemployment seen as increasingly important in a tight labour market
Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b