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What are the conceptual problems in measuring unemployment, and why is this such a key indicator...

What are the conceptual problems in measuring unemployment, and why is this such a key indicator of the economic well-being of our nation?

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Answer #1

Measurement of Unemployment rate has various problems:

1) It doesn't take into consideration discouraged workers

2) It doesn't capture long run unemployment rate.

3) It doesn't differentiate between part-time and full time workers. Workers who worked for an hour are also considered as employed.

4) it doesn't take report disguised unemployment

5) It doesn't reflect the payments structure.

Unemployment rate is the rate of unemployed to the total labour force. It is an important factor for determining economic well-being because a high unemployment rate is associated with low economic activity in a country and thus implying more people are unemployed and thus poverty and inequality are high in such economy.

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