Question

The country of Manhattan has an overall population of 5000. The population includes 500 people who are under the age of 16, 100 who are institutionalized, and 200 in jail and 300 in the military. Five hundred people are retired and do not work, while 600 are full time students. The total number of people who are working full time and part time is 2500. Out of the remaining population half of them have been looking for work within the last four weeks.

1. 1. What is the unemployment rate?
   2. The United States signs a new trade agreement with Maxico that leads to 300 individuals losing their jobs. What type of unemployment? Has the rate of unemployment changed? If so, what is the new rate? .
   3. What is required for the 300 individuals to become employed?

Answer 1

Solution :

First, we need to find the total labor force out of the total population.

To find the total labor force, we need to subtract the following from the total population:

a. People of age under 16

b. People institutionalized or in Jail

c. People in Military

d. Retired Workers

e. Full time students

f. People not looking for work

Therefore,

Total Labor Force(with people not looking for work) = 5000 - (500 + 100 + 200 + 300 + 500 + 600) = 5000 - 2200 = 2800

Now, we have to subtract the number of people who are not looking for work, which is [(2800 - 2500)/2] = 300/2 = 150

Therefore, actual Total Labor Force = 2800 - 150 = 2650

Part 1

Number of People looking for work = 150

Rate of Unemployment : (Number of People looking for work/Total Labour Force) × 100

= (150/2650) × 100 = 0.0566 × 100 = 5.66%

Rate of Unemployment = 5.66%

Part 2

This type of unemployment is called Institutional Unemployment. Institutional unemployment arises due to government policies and decisions which adversely affect the labor market and employed workers.

New Number of Unemployed Workers = 150 + 300 = 450

Therefore, New Unemployment Rate = (450/2650) × 100 0.1698 × 100 = 16.98%

New Unemployment Rate = 16.98%

Part 3

For the newly unemployed workers to again start working, the best way would be to lower the wage rate which will increase the demand for workers and they will again find employment. Another measure could be new Government projects that hire workers for labour.