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Chapter 20: Problem 6

What is the difference between the household survey and the establishment survey? Which survey do many economists prefer for measuring changes in employment? Why?

Short Answer

Expert verified
The Household survey collects employment data from individuals while the Establishment survey gets its data from employers. Many economists prefer the Establishment survey to measure employment changes due to its broader scope, lower statistical noise, and minimal revisions.

Step by step solution

01

Define Household Survey

The Household Survey (also called the Current Population Survey) involves interviews with households, where data is gathered from individuals about their employment status. It estimates the unemployment rate and provides comprehensive data regarding age, sex, and race of workers, as well as part-time and full-time employment information.
02

Define Establishment Survey

The Establishment Survey (also known as Payroll or Current Employment Statistics survey) collects data from employers about the number of workers they employ, the hours they work, and the earnings they receive. This survey covers construction, farming, and government sectors and provides detailed industry data.
03

Compare the Two Surveys and Determine Preference

While both surveys provide valuable insights, many economists prefer the Establishment survey when measuring changes in employment since it is based on records of about 150,000 businesses and government agencies that cover approximately one-third of all nonfarm employees, thus providing a broader picture. Additionally, the Establishment survey tends to have less statistical noise and is less subject to revision.

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Most popular questions from this chapter

(Related to Solved Problem 20.5 on page 683 ) In 1924 , the famous novelist F. Scott Fitzgerald wrote an article for the Saturday Evening Post titled "How to Live on \(\$ 36,000\) a Year," in which he wondered how he and his wife had managed to spend all of that very high income without saving any of it. The CPI in 1924 was \(17,\) and the CPI in 2016 was 240 . What income would you have needed in 2016 to have had the same purchasing power that Fitzgerald's \(\$ 36,000\) had in \(1924 ?\) Be sure to show your calculation.

An article in the Economist about Venezuela stated, "The economy is in such an appalling state, and inflation is so high, that Venezuelans greeted a rise of \(60 \%\) in the minimum wage on May 1 st with shrugs of 'so what?" What would be two reasons the people of Venezuela would shrug off a rise in the minimum wage of 60 percent?

An article in the Wall Street Journal noted that over a fourmonth period in late 2014 , employment in the state of Georgia "rose \(1 \%\) even as the state's jobless rate climbed 1.2 percentage points." Briefly explain how the state's unemployment rate could have increased at the same time that employment in the state was increasing.

Briefly describe the three major measures of the price level.

Describing the economy in England in \(1920,\) the historian Robert Skidelsky wrote the following: "Who would not borrow at 4 percent a year, with prices going up 4 percent a month?" What was the real interest rate paid by borrowers in this situation? (Hint: What is the annual inflation rate, if the monthly inflation rate is 4 percent?)
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