In: Economics
Current information relating to employment status in a small economy is presented in Table 1. Assume that the economy follows the same methodology as the Australian Bureau of Statistics for collecting and reporting on labour statistics.
Table 2. Employment status of the population
Employed |
11.486 million |
Unemployed |
0.609 million |
Working-age population |
18.557 million |
Total population |
23.225 million |
Not in the labour force |
6.462 million |
a) The unemployment rate is calculated by dividing total number
of unemployed persons by working age population.
Unemployment Rate = Total no. of unemployed / Working age
population
( 0.609 / 18.557 ) * 100 = 3.282%
b) The participation rate is calculated by dividing number people who are active in labor force by the working age population.
Participation Rate = ( Employed + Unemployed ) / Working Age
Population
( 11.486 + 0.609 ) / 18.557 = 0.6518
Participation Rate = 65.18%
c) The unemployment rate actually indicates the status of the
economy as a higher number of unemployment means there could be a
recessionary situation in the economy. However, the unemployment
number itself prone to miscalculation depending upon the data. In
reality, it could be either underestimated or overestimated because
of the way it has been carried out. The labor market, by its nature
is highly fragmented and because of that sometimes many people with
ability and skills could not get job. Such people either becomes
discouraged workers or part-time workers. Discouraged workers can
not be included in unemployed category because by definition they
are not seeking job. Similarly, part time workers are not included
in employed people because they are working full time or at least
40 hours per week.
Such instances affects the reporting of the data and that may
either underestimate or overestimate the unemployment
numbers.