Transcript Local & Regional Economics Unemployment Disparities Regional and Local Economics (RELOCE) Lecture slides – Lecture 5b.

Local & Regional Economics
Unemployment Disparities
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 5b
1
Local & Regional Economics
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
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Local & Regional Economics
Important questions for economists
1933
1999
North East
127.4
(29.8%)
156.5
(9.7%)
South East
72.6
(17%)
62.9
(3.9%)
 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?
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 5b
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Local & Regional Economics
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%
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Local & Regional Economics
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
Regional and Local Economic Analysis (RELOCE)
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Local & Regional Economics
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
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Local & Regional Economics
Types of unemployment
Frictional unemployment
Structural unemployment
Jobs available for
unemployed
Unemployment and
vacancies coexist
Takes time to match workers
to jobs and jobs to workers
Mismatch between skills and
jobs
Levels high in boom low in
slump
Reasons - technological
change; changes in
consumption; production
transfer
Some sectors experience
high level of churning
Long-term chronic in slum
re-training in boom
Regional and Local Economics (RELOCE)
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Local & Regional Economics
Measuring frictional and structural unemployment
Unemployment/Vacancy ratio Portsmouth TTWA, Oct 2000
Structural
3.50
3.00
2.50
2.00
1.50
1.00
Frictional
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Associate
Professional/Technical
Professional
Occupations
Other Occupations
Craft/Related
Occupations
Managers/Administrators
All occupations
Plant/Machine
Operatives
Clerical/Secretarial
Occupations
Sales Occupations
0.00
Personal/Protective
Service Occupations
0.50
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Local & Regional Economics
Neo classical unemployment
1. Real wages too high
Real
wage
D
S
w1
w*
2. Influenced by,
unions, benefit
levels, minimum
wage
3. Solution neuter TUs,
cut benefits, abolish
minimum wage
D
S
n1
n2
n*
Unemployment
Demand for labour,
supply of labour
4. Lower real,wages
induces employers to
take on staff, invest
and increase
capacity
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Local & Regional Economics
Demand deficient unemployment
Real
wage
D’
D
1. Severe decline in
national demand
S
2. Transmitted to all
regions
w*
3. Unemployment
reduced by increasing
aggregate demand
w1
S
n1 n2
D’
n*
D
4. Use regionally
discriminating taxation
and expenditure
Demand for labour,
supply of labour
Unemployment
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Local & Regional Economics
U - V relationship over time
Real Wage
Unemployment
D
S
E
I
A
W2
D
W*
F
W1
C
B
G
E
H
E
S
II
D
III
Employment
Vacancies
Adapted from Armstrong and Taylor
(2000) pp 183
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Lecture slides – Lecture 5b
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Local & Regional Economics
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)
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Local & Regional Economics
Real levels of coalfield unemployment
DoE Registered
unemployment
161,300
Census
unemployment
178,300
Real unemployment
318,600
Early retirement
22,200
Gov. Schemes
30,400
Sick
87,700
Regional and Local Economics (RELOCE)
Lecture slides – Lecture 5b
Adapted from Fothergill and Beatty
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Local & Regional Economics
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.
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Local & Regional Economics
Source: Fothergill and Beatty, Fig 3, Regional Studies 34.7 pp622
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Local & Regional Economics
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
Regional and Local Economic Analysis (RELOCE)
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Local & Regional Economics
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
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Lecture slides – Lecture 5b
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