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Chapter 20: Problem 5

What does the employment-population ratio measure? How does an unemployed person dropping out of the labor force affect the unemployment rate? How does it affect the employment-population ratio?

Short Answer

Expert verified
The employment-population ratio measures the proportion of the country's working-age population that is employed. When an unemployed person drops out of the labor force, it can affect the unemployment rate and the employment-population ratio differently. For the unemployment rate, it could either increase, decrease, or remain the same depending on the relative sizes of the remaining unemployed and the total labor force. For the employment-population ratio, it will either remain the same or decrease if the person was previously employed.

Step by step solution

01

Define the Employment-Population Ratio

The employment-population ratio is a statistical ratio that measures the proportion of the country's working-age population (ages 15 to 64 in most OECD countries) that is employed. Basically, it is calculated as (employed individuals / total working-age population) x 100.
02

Define the Unemployment Rate

The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. It is the measure of the number of people who are jobless, actively seeking work, and available to take a job as a proportion of the total labor force (unemployed + employed). The formula is (unemployed individuals / total labor force) x 100.
03

Explain how an unemployed person dropping out of the labor force affects these indicators

When an unemployed person drops out of the labor force, they are no longer considered as 'unemployed' or a part of the 'labor force'. This leads to a decrease in both the numerator and denominator of the unemployment rate, which could either increase, decrease, or remain the same depending on the relative sizes of the remaining unemployed and the total labor force. For the employment-population ratio, the denominator (total working-age population) will remain constant, but the numerator (employed individuals) won’t be affected by this change. Hence, the employment-population ratio will either remain the same or decrease (if the person was previously employed).

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Most popular questions from this chapter

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