Question

What problems does the Bureau of Labor & Statistics face in measuring unemployment? Discuss the three problems that make the consumer price index an imperfect measure of the cost of living.

Answer 1

A individual is defined as unemployed by the Bureau of Labor Statistics if he or she is not working but is looking for job and is accessible for job. The complete amount of individuals who work or are unemployed is the labor force. The unemployment rate is the proportion of the unemployed workforce.

The study has a number of problems. Designed in the 1930s, the ancient study placed the "Are you working?"If the respondent was a man or a woman, the question depends differently. A person was requested, "You did some job for pay or profit last week?"What did you do for job last week, maintaining a house or something else?" a female was questioned."Therefore, many females in search of paid job claimed to be" maintaining houses; "those females were not counted as unemployed. Until 1994, the BLS failed to fix the survey— asking females the same question that it posed to men

Until 1994, the BLS failed to fix the survey— asking females the same question that it posed to men. Women's unemployment rate grew by 0.5 percentage point the first time the fresh study question was used. More than 50 million females are in the workforce; the shift added to the formal count of the unemployed more than a quarter of a million employees.

The issue of understating women's unemployment has been solved, but there are still others. A employee who has been cut back on part-time work still counts as an employee, even though that employee would prefer full-time job. A individual who is out of job, who wants to work, who has been looking for job in the previous year, and who is accessible for job, but who has given up looking, is regarded a worker who has been discouraged. Discouraged workers are not counted as unemployed, but the amount of discouraged workers is maintained in a tally every month.

The three issues that create an incomplete measure of the consumer price index are: replacement prejudice- Substitution bias happens when people replace more costly products with less costly products. For instance, if the beef price becomes too costly, instead customers will buy chicken or pork.
New products / goods introduction- New products are not quickly included in the consumer price index, such as technology improvements. For example, their inclusion in the consumer price index was lagged from their introduction when the iPhone and other smartphones were introduced.

Quality changes which are not measured-As the quality of products and goods improves, their costs may decrease or increase, but these quality changes are not reflected in the consumer price index.