unofficial unemployment rates

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18 Apr 2012
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Unemployment rates are critical to any economy as it allows governments to have an
idea, concerning how much of the population is unemployed. Unemployment rates can be seen
as one of the factors that outline a healthy economy. Playing such a vital role, we need to be able
to understand how unemployment rates are calculated. The official unemployment rate is
calculated by dividing the number of unemployed people (out of work and actively looking for
work) by the total number of labor force participants (people age fifteen and older who are
working for pay or looking for work).
This is because of the overwhelming amount of people that are overlooked by this
calculation who play an important role in the economy. Those not included in the official
unemployment rate include; students who do not want to work while studying, people who
performed unpaid work at home, disabled who are not looking for work and the retired. Thus by
definition, I my self am not included in the official unemployment rate because I am a student
now looking for work. This being said, it leaves me wondering, if these vast varieties of people
are over looked then how can the official unemployment rate be used effectively by governments
to analyze various aspects of the economy?
Another group of people who are not included in the official definition of unemployment
or the unemployment rate are discouraged workers. Discouraged workers are potential labour
force participants who gave up the search for work with the belief that there is no work available.
Although I find it to be detrimental to not include these people in the unemployment rate because
of lack of accuracy, discouraged workers often either stay in school or return to school, which
can be beneficial as it raises there skill level. Various reasons help to explain why there are so
many unemployed people, the ones that I find to be most prevalent and covered by the text are
the reasons that outline the affect of labour shortages through industrial restructuring, technology
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