Question

A country with a population of eight million adults has five million employed, 500,000 unemployed, and the rest of the adult population is out of the labor force. What’s the unemployment rate? What share of the population is in the labor force? Sketch a pie chart that divides the adult population into these three groups.

Short answer

Unemployment Rate = 9.09%

Labor Force Participation Rate =68.75%

Step-by-step solution

Step 1. Definitions.

The unemployment rate is the percentage of adults who are able to work and are willing to work, and actively looking for work but are not able to find a job.

Labor Force consists of people who are economically active whether employed or unemployed.

Step 2. Calculation of Unemployment Rate.

Unemployment Rate = Number of people unemployed / number of people employed + number of people unemployed * 100

= 500000 / 5000000 + 500000 * 100

= 500000 / 5500000 * 100

= 0.0909 * 100

= 9.09 %

Step 3. Calculation of Labor Force Participation.

Labor force participation rate = number of people employed + number of people unemployed / total adult population * 100

= 5000000 + 500000 / 8000000 * 100

= 5500000 / 8000000 * 100

= 0.6875 * 100

= 68.75 %

it is the share of population in the labor force.

Step 4. Calculation of adult population out of the labor force: 

Adult population out of the Labor force : Total population of adults - (number of people employed + number of people unemployed)

= 8000000 - 5000000 + 500000

= 8000000 - 5500000

= 2500000

That means 2.5 million of adult population is out of the labor force.

Step 5. Diagrammatic Representation.

A)Number of people employed

B)Number of people unemployed

C)Adult population out of the labor force