Question

Total Population	300,000,000
Population Under 16 years old or institutionalized people	90,000,000
People able to work but not interested in working	80,000,000
Total Number of Unemployed people (U3 unemployment)	26,000,000
People trying to get new set of skills while searching for a job	6,000,000
People who are looking for a job or waiting to get one	15,000,000
People who have given up looking for a job	7,000,000
Part-time people who want to have a full time job	5,000,000

Based on the above information, calculate the following:

a. Working age population

b. Frictional unemployment rate

c. Structural unemployment rate

d. Cyclical unemployment rate

e. Total unemployment rate (U3)

f. Total unemployment rate (U6)

g. The natural rate of unemployment (full employment unemployment rate).

Answer 1

Solution

a.Working age population (in millions)

80,000,000 +26,000,000+6,000,000+15,000,000+7,000,000+5,000,000

=13.9 million

b.Frictional unemployement

Occurs when workers transition from one job to another jobs.In this process,they will be unemployed for a certain limited period of time before they get into a new job.

Part-time people who want to have a full time job is 5,000,000 (0.5 million)which can be considered as frictional unemployment

=0.5 /13.9

= 3.5%

c.Structural unemployment rate

= 0.6/13.9

d.Cyclical unemployment rate : Occurs when the demand for a particular role/position of work is closed / reduced temporarily.

e.Total unemployment rate (U3)

= 2.6 / 13.9

= 18.7%

f.Total unemployment rate (U6)

These are the workers who are depressed/frustrated after looking for jobs and have stopped looking for jobs.It also includes workers who are working part-time and looking to take up a full-time job

People who have given up looking for a job 7,000,000

Part-time people who want to have a full time job 5,000,000

Total unemployment rate (U6) in % = (0.7+0.5) / 13.9

= 8.6%

g.The natural rate of unemployment is : (frictional +structural) unemployement / (total workforce)

1.1/13.9

= 7.9%

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