Question

reconomics (Summer 2020) sec. 01 normally calculate the unemployment rate (the official rate)? What are the alternative me merployment rates? Why we may consider these alternative definitions of unemployment rates? Awe 1 B / Finish alterol

Answer 1

the unemployment rate is calculated as = (number of unemployed/total labor force)*100

where the total numbe of unemployed are those people who were willing to work and were searching for work actively in the last 4 weeks but unable to find work. Total labor force is the unemployed workers + the employed workers.

there are several other alternative measures of unemployment such as:

(1) (unemployed for 15 weeks or longer / labor force)*100

(2) (people who have lost jobs/labor force)*100

(3) (unemployed + discouraged workers/ labor force + discouraged workers)*100

There are several reasons why alternative measures can also be used. The official unemployment rate does not tell us anything about whether unemployment is a short term phenomenon where people find jobs quickly or long term. Alternative (1) tells us exactly the proportion that is long term unemployed. Simialrly, (2) tells us exactly the proportion that have lost jobs recently and thus reflect important information about the current state of the economy. The most important measure is (3) as it includes discouraged workers. These workers are those who have given up looking for jobs and are thus not included in the official unemployment rate data. Thus, the official rate is underreported and inclusion of these workers, as makes more economic sense, corrects for the bias.