Question

Question 5 a) Statistics Canada counts as employed people who work part-time but would prefer to work full-time. Suppose the people who had part-time jobs, but wanted full-time jobs, were counted as unemployed. Explain how the unemployment rate and the labour force participation rate would change. b) The labour force survey does not count discouraged workers as unemployed. Suppose discouraged workers were counted as unemployed. Explain how the unemployment rate and the labour force participation rate would change. c) How would the unemployment rate and the labour force participation rate change if discouraged workers were counted as unemployed rather than counted as not in the labour force? Show using the formula for both measurements. EN d) Suppose 180,000 people are employed, 20,000 people are unemployed, the working-age population is 250,000, and 50,000 people are not in the labour force. Calculate the unemployment rate.

Answer 1

5 a) Unemployment rate can understate the true unemployment rate because it doesn't account for people who are underemployed i.e. People who are employed part-time but wanted full time jobs. In the case were people with part-time jobs but wanted full-time jobs are counted as unemployed it would have a significant impact on the unemployment rate and as it would rise but it would provide a better picture of Unemployment in the country. Labor Force participation rate would decrease.

b) If discouraged workers were counted as unemployed, Unemployment rate would rise and provide a better picture on unemployment. It will have no impact on Labor Force Participation rate as discouraged workers are people who want to work but have given up searching for a job.