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Chapter 20: Problem 12

An article in the Wall Street Journal contained the following observation: "Every month, millions of workers leave the job market because of retirement, to care for children or aging parents, to pursue more education, or out of discouragement. Millions of others jump in after graduating." a. Are the millions of workers leaving the job market for the reasons given counted as unemployed in the BLS data? Briefly explain. b. Will the BLS count people entering the job market after graduating from high school or college as part of the labor force even if they don't find a job right away? Briefly explain.

Short Answer

Expert verified
(a) No, workers leaving the job market for other reasons are not counted as unemployed if they aren't actively seeking employment. (b) Yes, individuals who have graduated and are actively seeking employment are considered part of the labor force by BLS data, even if they haven’t found jobs yet.

Step by step solution

01

Understand the Definition of Unemployment

BLS defines unemployed workers as individuals who are jobless, seeking employment actively, and are currently available for work. So, if a worker leaves the labor force for any reason and does not seek active employment, they will not be counted as unemployed in the BLS data.
02

Definition of Labor Force

The labor force consists of all non-institutionalized individuals 16 years or older who either have a job or are seeking one. They are classified as employed and unemployed, respectively.
03

Analyze the Situation for Graduates

For individuals who are entering the job market after graduation, if they are actively seeking employment and are available for work despite not having a job, they are considered part of the labor force and contribute to the unemployment rate.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Definition of Unemployment
Understanding the definition of unemployment is key to interpreting Bureau of Labor Statistics (BLS) data accurately. Unemployment occurs when an individual who is actively seeking a job cannot find work. The Bureau of Labor Statistics has specific criteria for classifying someone as unemployed. To be considered unemployed by BLS standards, a person must be:
  • Without a job
  • Actively seeking work in the past four weeks
  • Available to take a job should an offer be made

Those who are not currently searching for work due to retirement, childcare, education, or discouragement are not considered part of the labor force and therefore are not counted in the unemployment figures. This distinction is crucial for understanding the nuances behind the reported unemployment rates.
Labor Force Participation
Labor force participation measures the percentage of the population that is either employed or actively seeking employment. BLS defines the labor force to include all individuals over the age of 16 who are not living in institutions (such as jails or nursing homes) and are not currently serving on active duty in the Armed Forces.

One key aspect of understanding labor force participation is recognizing who is not included. People not considered part of the labor force are those who do not have a job and are not actively seeking one, which includes retirees, full-time students, stay-at-home caregivers, and others who may be unable to work or are not interested in finding employment. Variations in labor force participation rates can provide insights into societal shifts, economic conditions, and demographic changes.
Unemployment Rate Calculation
The unemployment rate is a crucial indicator of economic health, representing the percentage of the labor force that is unemployed but actively seeking employment. The calculation of the unemployment rate involves two critical pieces of data:
  • The total number of unemployed individuals
  • The total number of people in the labor force

The formula for calculating the unemployment rate is given by:
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For example, if there are 10 million unemployed individuals and 150 million in the labor force, the unemployment rate would be \[\begin{equation}\bigg(\frac{10,000,000}{150,000,000}\bigg) \times 100 = 6.67\thinspace%\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\thinspace\end{equation}\]
This formula makes the unemployment rate a vital statistic for policymakers and economists as it offers a snapshot of the job market’s health and the economy overall.

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Most popular questions from this chapter

The BLS defines a job quit as a "voluntary separation initiated by an employee." The BLS estimated that there were 3.1 million job quits in March 2017 a. Economists distinguish three types of unemployment: frictional, structural, and cyclical. How would you classify unemployment caused by an increase in job quits? b. Would an increase in the number of job quits suggest that it was becoming easier or more difficult for people to find jobs? Briefly explain.

According to an article in the New York Times, in early 2015 , Walmart received bad customer reviews: "They complained of dirty bathrooms, empty shelves, endless checkout lines and impossible-to-find employees." Shortly thereafter, Walmart announced that it was changing its employment practice by, among other things, increasing wages. The article noted that a year and half later, “[Walmart store] managers describe a big shift in the kind of workers they can bring in by offering \(\$ 10\) an hour with a solid path to \(\$ 15\) an hour." Wouldn't raising wages from \(\$ 10\) per hour to \(\$ 15\) per hour reduce Walmart's profit? Why would the company have adopted such a policy?

In May 2017, an article in the New York Times had the headline: "We're Getting Awfully Close to Full Employment." The article contained the following observation: "The socalled \(U-6\) rate \(\ldots\) fell to 8.6 percent in April from 8.9 percent [in March]." a. What is the U-6 unemployment rate? Why do economists and policymakers track changes in this measure of the unemployment rate? b. What is full employment? If the U.S. economy was close to full employment in May 2017 , why was the \(\mathrm{U}-6\) measure of the unemployment rate still as high as \(8.6 ?\)

Jared Bernstein, an economist at the Center on Budget and Policy Priorities, stated, "I want to see receipt of unemployment insurance \(\ldots\) go up in recessions." If government unemployment insurance payments didn't go up, he explains, it "would be a sign that something's very wrong." What would be very wrong about government unemployment insurance payments failing to rise during a recession? What would be the consequences for the unemployed and for the economy?

The president of a manufacturing firm that makes precision tools in California's Silicon Valley was quoted in an article in the Wall Street Journal as saying that "production workers \(\ldots\) are scarce" and that "many applicants lack even the most rudimentary skills." He added, "I would say in this valley, people looking for jobs are unemployed for a reason." Are these applicants likely to be cyclically, frictionally, or structurally unemployed, and what would be the reason that most of them are unemployed? Briefly explain.
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