Unit 3: Measuring Unemployment

Question 1

Unemployment rate:

Answer 1

The percentage of the labour force not working at any given time

• This is the economic measure that receives the most attention in Canada
  Important to individuals
  Most people have had to look for a job at one time or another, so the impact of not finding a job is easy to imagine
  Easily observed and understood
  If someone is not working, then that person is not contributing to GDP, so high unemployment is a clear indicator that the economy is not using all its resources very efficiently

Question 2

Calculating the Unemployment Rate

Answer 2

Statistics Canada calculates the unemployment rate once a month

Question 3

Step One:

Answer 3

Determine Labour Force
Based on a survey of 54000 households
Population is grouped into a number of categories:
First category: those not eligible for work
under 15 years of age + institutionalized
Second category: people who are eligible to be part of the workforce but have chosen not to participate
homemakers, students older than 16 years of age and are in school full-time, retirees
Third category: the labour force
people who are either employed
and
people who are willing and able to work and actively seeking employment

Question 4

Step Three: Use Equation to Calculate

Answer 4

of unemployed/labour force (x100%)

Unemployment Equation:

of unemployed/labour force (x100%)

Question 4

Step Two:

Answer 4

Determine Number of Unemployed
Only the people in the third category factor into the unemployment rate:
People who are actively employed + People who are willing and able to work and actively seeking employment
This is the labour force
People who are willing and able to work and actively seeking employment
This is the number of unemployed

Question 5

Labour force includes;

Answer 5

People employed part-time/full-time, and willing (finding employment) and able (ex. homemakers) to work

Question 6

Criticisms of unemployment rate

Answer 6

The definition of the labour force gives rise to some criticism of unemployment rate as an accurate measure of unemployment:
1) It includes anyone who has any type of job as being “employed”
Many people who accept part time work want full time jobs
Partially employed, but appear fully employed
2) It does not include anyone who has been looking for a job for so long that they may have just “given up”
If someone is not “actively” looking for work, they are not counted as unemployed
*First two criticisms means that the unemployment rate is understated and is actually higher than the official figures suggest

3) There are many people who accept jobs for which they are overqualified (underemployed)
Underemployed as their full skills are not being utilized
Means the economy falls short of its full productive capacity

Question 7

Underemployed:

Answer 7

People working who accept jobs they’re overqualified for. Underemployment means their full skills aren’t being utilized, which means the economy falls short of its full productive capacity.