Unemployment
When people of working age (16-65) who are actively seeking and able to work, but are not employed.
Unemployment Rate
The number of unemployed people expressed as a percentage of the labor force.
The formula for calculating the unemployment rate is:
$$\text{Unemployment Rate} = \left(\frac{\text{Number of Unemployed People}}{\text{Labor Force}} \right) \times 100$$
The labor force consists of those who are employed plus those who are unemployed but actively seeking work.
Imagine an economy, Econland, with the following statistics:
Applying the formula for the unemployment rate:
$$\text{Unemployment Rate} = \left( \frac{2500}{50000} \right) \times 100$$
$$=5\%$$
Final Answer: There is a 5% unemployment rate in Econland.
Students often incorrectly assume that part-time workers are counted as unemployed.
But anyone who has any paid work, even if only for a few hours per week, is counted as employed in unemployment statistics.
How is the unemployment rate calculated?
Markscheme
Measuring unemployment has some underlying difficulties including:
In the aftermath of the 2008 Global Financial Crisis, many job seekers in the U.S. gave up on finding work, temporarily leading to an underestimation of unemployment.
Underemployment occurs when workers:
In many European countries post-COVID-19, skilled workers (like engineers) took up roles in retail or gig jobs due to limited opportunities in their fields
In developing economies like India, a large proportion of workers in street vending or domestic services are part of the informal sector and uncounted in employment surveys.
Workers who give up searching for a job and leave the labour force are called _____ workers, and because they are no longer counted the official rate understates true joblessness.
Markscheme
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Paywall
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