Question

The table below provides the results of the Current Population Survey for the year 2017. 3. a) Calculate the labor force participation rate and the unemployment rate in 2017. [You should show your work.] Number of People 665 Employed Unemployed Not in the Labor Force 35 300 b) The labor market diagram below depicts the supply and demand for labor services of working-age teenagers (age 16-19). Suppose the government institutes a minimum wage of $15 an hour. Depict the implications of this policy on teenage unemployment on the diagram. [You should briefly explain.] $10 No. of people

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Answer 1

a) Labor force participation rate Labor force/Working age population LFPR (665+35) (665+35+300) LFPR-7090 Unemployment rate Unemployed/ Labor force Unemployment rate-35/(665+35) Unemployment rate-5% «Formula: Working age population Labor force Not in labor force Labor force- Employed +Unemployed b) An imposition of minimum wage to S15 will lead to excess supply of labor in the market. That is, QS > QD, resulting in unemployment Graphically, this can be seen as below Unemployment 15 S10 QD QS No. of people Thus, there will be unemployment among the working age teenagers, post implementation of the minimum wage.