AS Economics and BusinessStructural change

Unit 2b

Mrs Hilton for revisionstation

Lesson Objectives

• To be able to identify all 3 sectors• To be able to identify structural change in the

sectors in UK business over time• To be able to discuss structural unemployment• To be able to answer a sample AS level

question on structural change and structural unemployment

Starter

• When you think of business in the UK what do you think of?

Car making?

Shipbuilding?

Definition of structural change from Edexcel

• Structural change involves permanent or semi-permanent changes in the composition of an economy as areas grow or dwindle

• Structural change is closely linked to changes in patterns of demand. (As demand for coal dwindled the coal industry collapsed)

Sectors

• Business can be divided up into 3 sectors:

• Primary – dig it• Secondary – make it • Tertiary – sell it

• Structural change is about a shift in sectors in the UK over time

Primary Sector

• The primary sector – includes activities directlyrelated to natural resources, e.g. farming, miningand oil extraction.

Dig it

Secondary Sector

•The secondary sector – covers all the other goods production in the economy, including the processing of materials produced by the primary sector. Manufacturing is the main element in this sector which also includes construction and the public utility industries of gas, water and electricity.

Make it

Tertiary Sector

•The tertiary sector – includes all the private sectorservices, e.g. Shops, distribution, insurance, banking and finance, and all the public sector services, such as health and defence.

Sell it

Structural Changes over time

Causes of structural change over time

• Over time UK has seen a decline in primary and secondary sector employment and output

• Over time it has also seen a rise in the employment and output of the tertiary sector

Causes of secondary decline

• Industrial revolution and the factories flourished employing 1000’s of workers

• 1900 half of all UK workers were employed in the secondary sector

• After 1900 and Mechanisation meant that less people were needed in manufacturing. A machine could do the work of many of workers.

Decline of shipbuilding• So what went wrong for this once mighty industry? • The reality is that British shipbuilding has been in trouble since

after the Second World War. • Some say it was industrial strife between management and unions. • Others blame lack of investment in new equipment and cost

effective manufacturing techniques. • But the general consensus is that our ships were too expensive and

that huge new shipyards in the emerging economies of Japan and South Korea, were simply producing cheaper ships by the 1970s.

• But leading shipbuilding expert Dr Martin Stopford, who worked in the industry for decades, said the crunch for commercial British shipbuilding came in the 1980s with a double whammy of world recession and a strong pound making our ships too expensive. Source / Video / video 2

Other causes

• Low wage competition from other countries – emergence of China as an industrial nation and their change from a planned economy into a market economy.

• Demographic changes – living longer so those over 75 has increased and with it an increased demand for healthcare services

• Incomes have risen and therefore a rise in consumer demand for; tourism, entertainment and finance all tertiary activities

• Technological change –obsolescence of a type of industry will mean there are whole groups of workers who no longer have the right skills for the market place.

Typesetters at work creating a newspaper by hand – modern

machinery means this is a lost skill

• Technological change and mechanisation in the primary sector has meant fewer workers are needed

Farm fruit pickers, many workers now replaced by one machine – productive efficiency but at a cost of

employment

Increase in tertiary sector

• Rise of the knowledge economy

• Our resources used to be; land labour capital and enterprise. Now our main resource is knowledge

• Rise of ICT based jobs• Rise of R&D jobs• Rise in science jobs• Definition (from wiki) an economy in which growth is

dependent on the quantity, quality, and accessibility of the information available, rather than the means of production.

Definition of structural unemployment from Edexcel

• Structural unemployment is caused by structural change within an economy caused by the decline of traditional industries or technological change.

Structural unemployment• Mismatch between skills and

work available• Lack of demand for a product

causes unemployment• Technological change causes

change in demand for a product. Example videos now obsolete and everyone buys DVD or Blue ray, those skills and jobs are lost.

• For example a shipbuilder made redundant will not be able to fill a vacancy for a maths teacher.

Sample question 1

• Which one of the following businesses is most likely to be associated with Structural Unemployment in the UK?

• A Food Retailing• B Hairdressing• C Shipbuilding• D Catering

Answer question 1

• – (C) Shipbuilding Structural unemployment is caused by structural change within an economy cause by

the decline of traditional industries (1 mark) or technological change. (1 mark). • Structural unemployment exists where there is a mismatch between their skills and

the requirements of the new job opportunities. (1 mark) e.g. their skills are not needed in other industries

• Shipbuilding has declined over recent years and is a traditional industry in the UK (1 mark).

• Structural unemployment tend to be long term due to the need for retraining (1 mark)

• Many ships are now made abroad due to cheaper labour (1 mark). • Food retailing, hairdressing and catering are more likely to be associated with

demand deficiency (cyclical) unemployment rather than structural unemployment because they are linked to a drop in Aggregate Demand (1 mark).

Sample question 2

• Structural change in an emerging economy such as China is likely to involve all of the following except

• A changing patterns of demand.• B a decline in certain industries.• C a reduction in uncertainty.• D new industries expanding.

Answer question 2• C – a reduction in uncertainty

Some understanding of what is meant by structural change e.g. Structural change involves permanent or semi-permanent changes in the composition of an economy as areas grow or dwindle (1 mark)

Some industries in China will decline and others will flourish and grow (1 mark) e.g. growth in toy manufacturing

The transition is likely to involve greater uncertainty (1 mark)

There may be uncertainty due to the changing nature of industries (1 mark) as employees fear job losses in the future (1 mark)

Structural change is closely linked to changes in the patterns of demand (1 mark) and China will have changes to the patterns of demand within the economy.

Revision Video