Chapter_8 - Chapter 8 Unemployment and Inflation 1...

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Chapter 8: Unemployment and Inflation 1. Measuring unemployment rate and labor force participation rate Labor force : Sum of all employed and unemployed people Unemployment rate : ratio of the unemployed people to the labor force Bureau of Census’ Current Population Survey measures the unemployment rate. Unemployed : Someone with age 16 or more who does not have a job and who is actively looking for a job. Out of labor force : People who do not have a job who are not actively looking for a job. Labor force participation rate : share of working age population in labor force. Example: Calculate labor force participation rate and the unemployment rate. i. Working age population: 250 ii. Labor force: 160 iii. Out of labor force: 90 iv. Employed: 140 v. Unemployed: 20 2. Unemployment rate is not a great measure of joblessness Distinguishing between the unemployed and those who are not in the labor force is hard. Think about discouraged workers who stop looking for a job because they think it is not possible to find one. Also part-time-employed people are counted as employed even if they want to be full- time employed. So unemployment rate understates the situation. There are also issues about self-reporting in the CPS household surveys. People may tell that they are actively looking for a job, but they may not do look for job at all in reality. And there are incentives for people to do that. This is because, the unemployed people are entitled to receive unemployment benefits. Or individuals who deal with illegal activity are likely to lie. 3. Trends in labor force participation
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Decline in men: early retirements and staying in school longer Increase in women: change in attitudes towards work, outlawing discrimination, greater wages for women 4. Unemployment rate among demographic groups: differs a lot 5. Types of unemployment: The good, the bad and the ugly
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Chapter_8 - Chapter 8 Unemployment and Inflation 1...

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