Question

What are three reasons the unemployment rate is not the perfect indication of problems in the labor market?

Answer 1

There are certain reasons to mention why unemployment rate is considered as not the perfect indicator of problems in the labour market

They are

1) Not taking discouraged workers into account

unemployment rate does not account for the discouraged workers are the workers who are not actively looking for jobs and if this rate is actually high due to discouraged workers, it is something misleading on the whole.

2) Doesn't account for low wage jobs matching to skill

Another reason why you can actually mention that unemployment rate isn't a good indicator because of the fact that certain people are in reflected in unemployment rate but there in a low wage job which doesn't match their skill but still they are forced to take it as the relevant jobs aren't available. This is the problem that isn't reflected

3) Doesn't separate Part Time workers

Unemployment rate doesn't actually cover the part time workers where they are actually included under the employed section but speaking strictly there actually part time workers whose job has no security and they face lot of issues which isn't reflected in the rate and this is another problem of unemployment rate.