Question

Why does the nation’s unemployment rate understate the true level of joblessness in the United States? Explain by using technical definitions of (1) non-institutional working-age population, (2) labor force, (3) employed, (4) unemployed, and (5) discouraged workers. Would a broader definition of unemployed have ethical and policy implications for our society?

Answer 1

The Nation's unemployment rate understates the true level of joblessness in the United States. The major reason behind this is that certain discouraged workers who inspite of being at young age have stopped seeking for job being discouraged by the external circumstances or the negative attitude of the employer. Such discouraged workers are not being included in the labor force. The non-institutional working age population also varies from district to district and thus does not give the actual picture of unemployment.

The rate of unemployment is the unemployed people out of the total labor force expressed in percentage. If the data pertaining to labor force or the unemployed people is not correct, it does not give the accurate representation of unemployment rate. If the survey covers only a sample and not the entire population, it does not give the accurate representation of unemployment rate.

Broader definintion of unemployed gives a complete and accurate stste of the rate of unemployment in a particular country and thus gives an alarming signal to the government to take appropriate measures to control unemployment otherwise the govenment would be quite relaxed looking at the low understated rate of unemployment.