Labour Force Statistics
• Statistics Canada divides population into 3 groups:
Employed: A person is considered employed if he or she has spent most of the previous week
working at a paid job.
Unemployed: A person is unemployed if he or she is on temporary layoff, is looking for a job,
or is waiting for the start date of a new job.
Not in the labour force: everyone else
The labour force is the total # of workers, including the employed and unemployed.
Labour force = Number of employed + Number of unemployed
• Unemployment rate (“u-rate”): % of the labour force that is unemployed
U-Rate = [Number of unemployed/Labour Force] * 100
• Labour force participation rate: % of the adult population that is in the labour force
Labour force participation rate = [Labour Force/ Adult Population] *100
Labour Market Experiences of Various Demographic Groups
- Statistics Canada publishes these statistics for demographic groups within the population.
- These data reveal widely different labour market experiences for different groups.
- Discouraged workers
o would like to work but have given up looking for jobs
o classified as “not in the labour force” rather than “unemployed”
Does the Unemployment Rate Measure What We Want It To?
It is difficult to distinguish between a person who is unemployed and a person who is not in the
Discouraged searchers, people who would like to work but have given up looking for jobs after an
unsuccessful search, do not show up in unemployment statistics.
Other people may claim to be unemployed in order to receive financial assistance, even though they
aren’t looking for work
Some are being paid “under the table”
Workers who are working part-time when in fact they want to work full-time are underemployed;
they not show up in unemployment statistics
How Long Are the Unemployed without Work?
Most spells of unemployment are short.
In 2009, the average spell of unemployment lasted 15.6 weeks.
Economists and policymakers must be careful when interpreting data on unemployment and
designing policies to help the unemployed
Most people who become unemployed will soon find jobs.
Policy solutions directed toward fixing the unemployment problem should be directed toward those
suffering prolonged spells of unemployment
Why Are There Always Some People Unemployed?
- There’s always some unemployment, though the u-rate fluctuates from year to year.
- Natural rate of unemployment
is the rate of unemployment to which the economy tends to return in the long run.
in Canada, it is estimated that the natural rate of unemployment is currently between 6 and 8
- Cyclical unemployment
the deviation of unemployment from its natural rate
associated with business cycles, which we’ll study in later chapters
- Even when the economy is doing well, there is always some unemployment, including:
- Frictional unemployment
occurs when workers spend time searching for the jobs that best suit their skills and tastes
short-term for most workers
frictional unemployment is inevitable because the economy is always changing
- Structural unemployment
occurs when there are fewer jobs than workers usually longer-term
Workers have different tastes & skills, and jobs have different requirements.
Job search is the process of matching workers with appropriate jobs.
Sectoral shifts are changes in the composition of demand across industries or regions of the
Such shifts displace some workers, who must search for new jobs appropriate for their skills &
The economy is always changing, so some frictional unemployment is inevitable.
Public Policy and Job Search
Government employment agencies
provide information about job vacancies to speed up the matching of workers and jobs.
Public training programs
aim to equip workers displaced from declining industries with the skills needed in growing industries.
EI: a government program that partially protects workers’ incomes when they become unemployed
EI increase the unemployment rate
However it achievesone primary goal of reducing the income uncertainty faced by unemployed
1. Minimum-Wage Laws
a. The minimum wage may exceed the equilibrium wage for the least skilled or experienced
workers, causing structural unemployment.
b. But this group is a small part of the labour force, so the min. wage can’t explain most
unemployment in the economy.
c. The structural unemployment that
arises from an above-equilibrium
wage is, in an important sense,