Q1 Here are some statistics for economy X. Population: 20.5 million Population u
ID: 1159808 • Letter: Q
Question
Q1
Here are some statistics for economy X.
Population: 20.5 million
Population under the age of 16 years: 7.5 million
Discouraged workers: 150,000.
Retired people: 1 million
House-wives and house-husbands: 1 million
Structurally unemployed people: 200,000
Frictionally unemployed people: 200,000
Cyclically unemployed people: 2 million
Using only these statistics above, answer the following four parts. Show full calculations.
i. What is the labour force participation rate in economy X?
ii. What is the current total unemployment rate in economy X?
iii. What is the percentage of the adult labour force that is employed?
iv. In percentage terms, how much new unemployment occurred in economy X after it went into a recession?
Explanation / Answer
ans1.
Labour force participation rate is defined as the section of working population in the age group of 16-64 in the economy currently employed or seeking employment. People who are still undergoing studies, housewives and persons above the age of 64 are not reckoned in the labour force.
LFPR = Labor Force / Civilian Non-Institutionalized Population
where the Labor Force = Employed + Unemployed
Civilian Non-institutional Population - Everyone living in the U.S. who is 16 or older MINUS inmates of institutions such as prisons, nursing homes and mental hospitals and MINUS those on active duty in the Armed Forces.
Labor Force - Everyone who is classified as either Employed or Unemployed.
Employed - Anyone aged 16+ in the civilian non-institutional population who worked in the last week. That means they worked an hour or more as paid employees or 15 hours or more as unpaid workers in a family-owned business or farm. It also includes those who had jobs or businesses, but didn't work that week because they were on vacation, sick, were on maternity or paternity leave, on strike, were in training, or had some other family or personal reasons they didn't work.
It doesn't matter whether it was paid time off or not. Each worker was only counted once, even if they held two or more jobs. Volunteer work and work around the house did not count.
Unemployed - Those age 16 or more who weren't employed, but were available for work and actively looked for a job within the past four weeks.
People who would like work, but haven't actively looked for it in the last month are not counted as being in the labor force no matter how much they want a job. They are counted in the population, however.
The BLS does keep track of them. It calls some of them "marginally attached to the labor force."The BLS calls some of the marginally attached "discouraged workers."
The other group that isn't included in the labor force are students, homemakers, retired people and those under 16 who are working. They are, however, counted in the population.
This type of unemployment exists because of friction in the labour market. Jobs may exists but people do not go to take up jobs away from home for domestic reasons such as children's education, family and friendly ties and, housing problem in a new place.
It is caused by a change in the demand for the products of a given industry. The closing of the particular industry may cause structural changes in the nation's industry as a whole. If labour is specific, it is immobile between industries and unemployment results. The pace of modern technology is so fast that it makes past techniques obsolete, causing unemployment in old industries.
Both external and internal factors such as wars, strikes, population changes, political disturbances, floods, droughts, changes in consumption patterns, investment, savings, spending, supply of credit, business outlook etc. bring about this type of unemployment. This type of unemployment was a serious problem before the Second World War. Now it has been largely mastered by Government activity to control the development of cycles.
here,
unemployed population= 200000+200000+2000000 = 2400000 = 2.4 million
[Structurally unemployed people: 200,000
Frictionally unemployed people: 200,000
Cyclically unemployed people: 2 million]
Not in labor force = 1 M + 150000 = 1150000 = 1.15 million
[Discouraged workers: 150,000.
House-wives and house husbands: 1 million]
non institutional civilian population = total population - under 16 pop. - retired people
= 20.5 - 7.5 -1 = 12 million
further,
non institutional civilian population = labor force + not in labor force
12 = labor force + 1.15
=> Labor force = 10.85 million
further ,
labor force = employed + unemployed
10.85 = employed + 2.4
=> employed = 8.45 million
ans1.
labor force participation rate= labor force / non institutional civilian pop
= 10.85 /12 * 100 = 90.41%
ans 2. unemployment rate = unemployed / labor force
= 2.4 /10.85 * 100 = 22.11 %
ans 3. employment rate = emplyed / labor force
= 8.45 / 10.85 * 100 = 77.88%
ans4. new employment rate = cyclically unemployed / labor force
= 2 /10.85 * 100
= 18.43 %
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