Question

Key Idea: We measure unemployment in order to determine whether we are achieving low unemployment.
 

Describe how the BLS determines whether an individual is “employed,” “unemployed,” or “not in the labor force.”

Explain how to calculate the unemployment rate.

 
 

List the four reasons for unemployment and explain why a discouraged worker is not considered to be unemployed

What criteria must be met in order for a person to be characterized as being unemployed?

If the price of, say, oranges has risen, does it follow that the price level has risen too? Explain your answer.

Answer 1

As per BLS, "Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Persons who were not working and were waiting to be recalled to a job from which they had been temporarily laid off are also included as unemployed."

"Employed persons consist of: persons who did any work for pay or profit during the survey reference week; persons who did at least 15 hours of unpaid work in a family-operated enterprise; and persons who were temporarily absent from their regular jobs because of illness, vacation, bad weather, industrial dispute, or various personal reasons."

"Persons who are neither employed nor unemployed are not in the labor force. This category includes retired persons, students, those taking care of children or other family members, and others who are neither working nor seeking work. "

Unemployment rate = Number of people unemployed/ (Number of people employed + unemployed)

The common reasons for unemployment are:

1) High population: Number of people willing to work at the prevailing wages is higher than the demand for labor.

2) Lack of skills: People may not possess the skills demanded by the employer.

3) Slow economic growth: The rate of creation of new jobs is slower than the growth of population.

4) Societal issues such as gender discrimination.

For a person to be characterized unemployed, he should be actively looking for jobs and should be willing to work at the prevailing wages. A discouraged worker is, thus, not considered unemployed as he is not seeking employment.