Question

(a)       Based on the information in the above table, what is the unemployment rate? What is the labor force participation rate?

Category	Number of people (millions)
Total population	246
Working-age population	207
Labor force	139
Employed	133
Unemployed	6

(b)       Suppose there are 180 million employed people and 20 million unemployed people.

            (i)        What is the unemployment rate?

            (ii)       Suppose that 5 million unemployed people give up their search for jobs and become discouraged workers. What is the new official unemployment rate?

Answer 1

Ans) Employed people are those who are working full time or part time under certain payroll. Further military people and charity work is not included in the category of employed.

Unemployed are those who are eligible to work and are actively looking for job. So according to the definition, those who voluntarily give up searching job are excluded from the definition of unemployed.

Labour force includes both employed and unemployed i.e. Labour force = employed + unemployed.

Employment rate= (employed ÷ labour force)×100

Unemployment rate = (unemployed ÷ labour force)×100.

Labour force participation rate = (labour force ÷ working age population)×100

A) Unemployment rate = (unemployed÷ labour force)×100 = (6million÷139million)×100 = 4.31%

Labour force participation rate = (labour force÷ working age population)×100 = (139÷207)×100 = 67.14%

B) Labour force = employed + unemployed = 180million + 20 million = 200 million

Unemployment rate = (unemployed ÷ labour force)×100= (20÷200)×100 =10%

Now since 5 million people gave up looking job, unemployed people = 20 million - 5million = 15 million

So new labour force = unemployed + employed= 15million + 180 million = 195 million

New unemployment rate = (unemployed ÷ labour force) ×100= (15÷195)×100 = 7.69%