Question

7. Discouraged searchers and underemployed workers By keeping track of discouraged workers and underemployed workers, Statistics Canada gets a dearer picture of the true employment situation than if It looked at only the number of unemployed workers. Which of the following statements correctly describe discouraged searchers? Check all that apply. They would like to have jobs They are part-time workers who want to work full time They are not in the labour force They have not looked for work during the past four weeks Consider a hypothetical economy in which the labour force consists of 100 people of those people are employed time and 15 people are unemployed. The government of this economy follows the same conventions as Statistics Canada in computing its employment figures. The unemployment rate is simply the number of unemployed people divided by the number of people in the labour force. Initially then, the unemployment rate is (15/100) x 100% - 15.0%. Suppose a reduction in foreign demand for this economy's products causes an economic recession prolonged period of declining output. The following table offers two different possible scenarios resulting from the recession. Calculate the unemployment rate associated with each scenario Unemployment Rate Scenario A: Firms reduce work hours by 25%. The number of underemployed workers rises as firms respond to the reduction in the demand for their products by reducing the hours of each employed person from 40 to 30 hours per week. Firms reduce employment by 25%. The number of unemployed workers rises as firms respond to the reduction in the demand for their products by laying off 21 previously employed workers. Scenario B: the true extent of underemployment in the economy, because statistics Canada counts part The unemployment rate in scenario A time workers as employed.

Answer 1

Answer:

The statements that correctly describe discouraged searchers are:

1.They would like to have jobs

2.They are not in the labor force

3. They have not looked for work during the past four weeks

The part time workers who want to work full time are called underemployed.

Scenario A

Total Labor force = 100

Number of persons employed = 85

Number of persons unemployed = 15

Work hours reduced by 25% or 40 hours to 30 hours

Unemployment rate = ?

The formula for unemployment rate is = Total number of unemployed workforce/Total labor force (workforce)

When the work hours has reduced, the labor force is not at its full potential because of structural changes of recession. Since they are still working, they are included in the total workforce and since they are not fully unemployed they cannot be counted as unemployed. Unemployed are defined by "Bureau of Labor Statistics as people who do not have a job, have actively looked for work in the past four weeks, and are currently available for work. It excludes those who have not looked for work within the past four weeks." It counts part time workers as employed.

So, unemployment rate remains same as 15% [(15/100)*100] where 15 is unemployed, 100 is total workforce(employed or underemployed(85)+unemployed(15))

Scenario 2

Firm lays off 21 employed workers, which means now total number of unemployed workers = 15+21=36

Unemployment rate = (36/100)*100 = 36%

The unemployment rate in scenario A 15% the true extent of underemployment in the economy because Statistics Canada counts part workers as employed.