which choice best describes what might happen to unemployment rates if retirement ages were raised
Chapter 21. Unemployment
21.i How the Unemployment Charge per unit is Defined and Computed
Learning Objectives
By the end of this section, you volition be able to:
- Calculate the labor forcefulness percentage and the unemployment rate
- Explicate hidden unemployment and what it means to be in or out of the labor force
- Evaluate the collection and estimation of unemployment data
Unemployment is typically described in newspaper or idiot box reports as a pct or a rate. A recent report might have said, for example, from August 2009 to Nov 2009, the U.S. unemployment rate rose from 9.7% to 10.0%, but by June 2010, it had fallen to 9.5%. At a glance, the changes between the percentages may seem pocket-sized. But recall that the U.S. economy has about 155 million adults who either accept jobs or are looking for them. A rise or fall of just 0.1% in the unemployment rate of 155 million potential workers translates into 155,000 people, which is roughly the full population of a city like Syracuse, New York, Brownsville, Texas, or Pasadena, California. Large rises in the unemployment rate mean big numbers of task losses. In November 2009, at the peak of the recession, nigh 15 meg people were out of work. Even with the unemployment rate at present at v.5% as of Feb 2015, about viii million people total are out of work.
The Agency of Labor Statistics tracks and reports all data related to unemployment.
Who'south In or Out of the Labor Forcefulness?
Should everyone without a job be counted as unemployed? Of form non. Children, for example, should not exist counted as unemployed. Surely, the retired should not be counted as unemployed. Many full-fourth dimension higher students have only a role-time job, or no job at all, just information technology seems inappropriate to count them as suffering the pains of unemployment. Some people are non working because they are rearing children, ill, on vacation, or on parental leave.
The point is that the adult population is not merely divided into employed and unemployed. A third group exists: people who exercise not have a job, and for some reason—retirement, looking after children, taking a voluntary break earlier a new task—are not interested in having a task, either. It besides includes those who practise want a job but accept quit looking, often due to existence discouraged by their inability to find suitable employment. Economists refer to this 3rd group of those who are non working and non looking for work as out of the labor strength or not in the labor forcefulness.
The U.S. unemployment rate, which is based on a monthly survey carried out by the U.South. Agency of the Demography, asks a series of questions to divide upward the adult population into employed, unemployed, or not in the labor strength. To be classified as unemployed, a person must be without a task, currently available to piece of work, and actively looking for work in the previous four weeks. Thus, a person who does not have a task simply who is not currently available to work or has not actively looked for piece of work in the last iv weeks is counted as out of the labor force.
Employed: currently working for pay
Unemployed: Out of work and actively looking for a job
Out of the labor force: Out of paid work and non actively looking for a job
Labor force: the number of employed plus the unemployed
Calculating the Unemployment Rate
Figure 1 shows the three-manner division of the over-16 adult population. In Feb 2015, about 62.viii% of the developed population was "in the labor strength"; that is, people are either employed or without a task but looking for work. Those in the labor force can be divided into the employed and the unemployed. These values are also shown in Tabular array 1. The unemployment rate is not the percentage of the total adult population without jobs, but rather the per centum of adults who are in the labor force but who do not have jobs:
[latex]Unemployment\;rate = \frac{Unemployed\;people}{Total\;labor\;force}\;\times\;100[/latex]
| Total developed population over the historic period of xvi | 249.9 million |
| In the labor force | 157 meg (62.8%) |
| Employed | 148.3 million |
| Unemployed | 8.7 one thousand thousand |
| Out of the labor force | 92.9 million (37.two%) |
| Table 1. U.Due south. Employment and Unemployment, Feb 2015. (Source: http://world wide web.bls.gov/news.release/empsit.t01.htm) | |
In this example, the unemployment charge per unit tin can be calculated as viii.vii million unemployed people divided by 157 million people in the labor force, which works out to a 5.5% rate of unemployment. The post-obit Work It Out characteristic will walk y'all through the steps of this adding.
Calculating Labor Force Percentages
So how do economists arrive at the percentages in and out of the labor force and the unemployment rate? We will apply the values in Table 1 to illustrate the steps.
To determine the percentage in the labor forcefulness:
Step 1. Split up the number of people in the labor strength (157 1000000) by the full adult (working-age) population (249.nine million).
Step ii. Multiply by 100 to obtain the percentage.
[latex]\begin{array}{r @{{}={}} l}Percentage\;in\;the\;labor\;forcefulness & \frac{157}{249.9} \\[1em] & 0.6282 \\[1em] & 62.eight\% \end{array}[/latex]
To determine the percentage out of the labor forcefulness:
Step 1. Divide the number of people out the labor force (92.9 million) by the full adult (working-age) population (249.9 million).
Stride 2. Multiply by 100 to obtain the percentage.
[latex]\brainstorm{array}{r @{{}={}} fifty}Per centum\;in\;the\;labor\;strength & \frac{92.9}{249.ix} \\[1em] & 0.3717 \\[1em] & 37.2\% \terminate{array}[/latex]
To determine the unemployment rate:
Step ane. Split the number of unemployed people (eight.7 million) by the total labor force (157 million).
Footstep 2. Multiply by 100 to obtain the rate.
[latex]\begin{assortment}{r @{{}={}} l}Unemployment\;rate & \frac{eight.7}{157} \\[1em] & 0.0554 \\[1em] & 5.5\% \end{assortment}[/latex]
Subconscious Unemployment
Even with the "out of the labor strength" category, there are still some people that are mislabeled in the categorization of employed, unemployed, or out of the labor force. There are some people who take only part time or temporary jobs and who are looking for full fourth dimension and permanent employment that are counted as employed, though they are not employed in the fashion they would like or need to exist. Additionally, there are individuals who are underemployed. This includes those that are trained or skilled for ane blazon or level of work who are working in a lower paying job or ane that does not utilize their skills. For example, an individual with a college caste in finance who is working every bit a sales clerk would be considered underemployed. They are, however, besides counted in the employed group. All of these individuals fall nether the umbrella of the term "subconscious unemployment." Discouraged workers, those who have stopped looking for employment and, hence, are no longer counted in the unemployed also fall into this group
Labor Force Participation Rate
Another important statistic is the labor strength participation rate. This is the percentage of adults in an economic system who are either employed or who are unemployed and looking for a job. And then, using the data in Figure 1 and Table 1, those included in this adding would be the 157 meg individuals in the labor forcefulness. The rate is calculated by taking the number of people in the labor strength, that is, the number employed and the number unemployed, divided past the total adult population and multiplying by 100 to get the percent. For the data from Feb 2015, the labor forcefulness participation rate is 62.8%. Historically, the civilian labor force participation rate in the United States climbed get-go in the 1960s equally women increasingly entered the workforce, and it peaked at effectually 68% in late 1999 to early 2000. Since so, the labor strength participation rate has steadily declined.
The Establishment Payroll Survey
When the unemployment study comes out each calendar month, the Bureau of Labor Statistics (BLS) also reports on the number of jobs created—which comes from the establishment payroll survey. The payroll survey is based on a survey of about 140,000 businesses and government agencies throughout the United States. Information technology generates payroll employment estimates by the following criteria: all employees, boilerplate weekly hours worked, and boilerplate hourly, weekly, and overtime earnings. One of the criticisms of this survey is that it does not count the cocky-employed. It also does non make a distinction between new, minimum wage, function time or temporary jobs and total time jobs with "decent" pay.
How Is the U.S. Unemployment Data Nerveless?
The unemployment charge per unit announced by the U.S. Bureau of Labor Statistics each month is based on the Electric current Population Survey (CPS), which has been carried out every month since 1940. Great care is taken to make this survey representative of the state as a whole. The country is first divided into 3,137 areas. The U.South. Bureau of the Census then selects 729 of these areas to survey. The 729 areas are and then divided into districts of about 300 households each, and each district is divided into clusters of well-nigh four dwelling units. Every month, Census Bureau employees call about fifteen,000 of the iv-household clusters, for a total of 60,000 households. Households are interviewed for 4 consecutive months, then rotated out of the survey for eight months, and so interviewed once more for the aforementioned iv months the following twelvemonth, before leaving the sample permanently.
Based on this survey, unemployment rates are calculated past land, industry, urban and rural areas, gender, age, race or ethnicity, and level of teaching. A wide variety of other information is available, also. For case, how long take people been unemployed? Did they get unemployed because they quit, or were laid off, or their employer went out of business? Is the unemployed person the only wage earner in the family? The Electric current Population Survey is a treasure trove of data near employment and unemployment. If you are wondering what the difference is between the CPS and EPS, read the post-obit Clear it Upwards feature.
What is the difference between CPS and EPS?
The Electric current Population Survey (CPS) conducted by the United States Census Agency measures the pct of the labor force that is unemployed. The establishment payroll survey (EPS) by the Bureau of Labor Statistics is a payroll survey that measures the net change in jobs created for the month.
Criticisms of Measuring Unemployment
There are ever complications in measuring the number of unemployed. For case, what well-nigh people who exercise non have jobs and would exist available to piece of work, just have gotten discouraged at the lack of bachelor jobs in their expanse and stopped looking? Such people, and their families, may exist suffering the pains of unemployment. But the survey counts them as out of the labor force because they are non actively looking for work. Other people may tell the Census Bureau that they are ready to piece of work and looking for a job only, truly, they are not that eager to work and are not looking very hard at all. They are counted as unemployed, although they might more accurately exist classified as out of the labor forcefulness. However other people may have a job, perhaps doing something like thou work, child care, or cleaning houses, simply are non reporting the income earned to the tax regime. They may report being unemployed, when they actually are working.
Although the unemployment rate gets nearly of the public and media attending, economical researchers at the Bureau of Labor Statistics publish a wide array of surveys and reports that try to measure out these kinds of issues and to develop a more nuanced and complete view of the labor market. It is not exactly a hot news wink that economic statistics are imperfect. Even imperfect measures like the unemployment charge per unit, however, can however be quite informative, when interpreted knowledgeably and sensibly.
Click here to learn more than about the CPS to read frequently asked questions about employment and labor.
Central Concepts and Summary
Unemployment imposes high costs. Unemployed individuals suffer from loss of income and from stress. An economy with high unemployment suffers an opportunity toll of unused resources. The adult population can exist divided into those in the labor force and those out of the labor force. In turn, those in the labor force are divided into employed and unemployed. A person without a job must be willing and able to work and actively looking for work to be counted as unemployed; otherwise, a person without a chore is counted as being out of the labor force. The unemployment charge per unit is defined as the number of unemployed persons divided past the number of persons in the labor force (not the overall adult population). The Current Population Survey (CPS) conducted by the United States Census Bureau measures the percentage of the labor forcefulness that is unemployed. The institution payroll survey by the Agency of Labor Statistics measures the net change in jobs created for the calendar month.
Cocky-Bank check Questions
- Suppose the adult population over the age of sixteen is 237.8 million and the labor force is 153.9 million (of whom 139.1 meg are employed). How many people are "not in the labor force?" What are the proportions of employed, unemployed and not in the labor force in the population? Hint: Proportions are percentages.
- Using the data from the solution to Self-Check Question i, what is the unemployment charge per unit? These data are U.S. statistics from 2010. How does it compare to the February 2015 unemployment rate computed earlier?
Review Questions
- What is the departure betwixt beingness unemployed and being out of the labor force?
- How is the unemployment charge per unit calculated? How is the labor strength participation charge per unit calculated?
- Are all adults who practise not agree jobs counted equally unemployed?
- If you are out of school but working part fourth dimension, are y'all considered employed or unemployed in U.S. labor statistics? If you are a total time pupil and working 12 hours a week at the college deli are you considered employed or non in the labor strength? If you are a senior citizen who is collecting social security and a alimony and working as a greeter at Wal-Mart are y'all considered employed or not in the labor strength?
- What happens to the unemployment rate when unemployed workers are reclassified as discouraged workers?
- What happens to the labor force participation rate when employed individuals are reclassified as unemployed? What happens when they are reclassified as discouraged workers?
- What are some of the problems with using the unemployment charge per unit every bit an accurate measure of overall joblessness?
- What criteria are used past the BLS to count someone equally employed? As unemployed?
- Assess whether the post-obit would be counted as "unemployed" in the Current Employment Statistics survey.
- A husband willingly stays dwelling house with children while his married woman works.
- A manufacturing worker whose factory just closed downward.
- A college student doing an unpaid summer internship.
- A retiree.
- Someone who has been out of piece of work for ii years but keeps looking for a job.
- Someone who has been out of work for two months only isn't looking for a job.
- Someone who hates her present job and is actively looking for another i.
- Someone who decides to take a function time task because she could not detect a full time position.
Critical Thinking Questions
- Using the definition of the unemployment charge per unit, is an increment in the unemployment rate necessarily a bad affair for a nation?
- Is a decrease in the unemployment rate necessarily a good thing for a nation? Explain.
- If many workers get discouraged from looking for jobs, explain how the number of jobs could turn down only the unemployment rate could fall at the same fourth dimension.
- Would you lot wait subconscious unemployment to be higher, lower, or about the same when the unemployment charge per unit is high, say 10%, versus low, say four%? Explain.
Self-Bank check Questions
A land with a population of viii 1000000 adults has five one thousand thousand employed, 500,000 unemployed, and the residuum of the adult population is out of the labor force. What's the unemployment charge per unit? What share of population is in the labor forcefulness? Sketch a pie chart that divides the developed population into these iii groups.
Glossary
- discouraged workers
- those who accept stopped looking for employment due to the lack of suitable positions available
- labor force participation rate
- this is the percentage of adults in an economy who are either employed or who are unemployed and looking for a task
- out of the labor forcefulness
- those who are not working and non looking for work—whether they desire employment or non; besides termed "non in the labor force"
- underemployed
- individuals who are employed in a job that is below their skills
- unemployment rate
- the percentage of adults who are in the labor strength and thus seeking jobs, but who do not have jobs
Solutions
Answers to Self-Cheque Questions
- The population is divided into those "in the labor force" and those "not in the labor force." Thus, the number of adults not in the labor force is 237.eight – 153.9 = 83.9 million. Since the labor force is divided into employed persons and unemployed persons, the number of unemployed persons is 153.ix – 139.1 = 14.8 million. Thus, the adult population has the following proportions:
- 139.1/237.8 = 58.5% employed persons
- 14.8/237.8 = 6.2% unemployed persons
- 83.9/237.eight = 35.three% persons out of the labor force
- The unemployment rate is defined as the number of unemployed persons as a percentage of the labor force or xiv.8/153.9 = nine.6%. This is higher than the February 2015 unemployment rate, computed earlier, of 5.5%.
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