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ECON 0110 (84)

Section 13 Notes.doc

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ECON 0110

SECTION 13: UNEMPLOYMENT AND EMPLOYMENT EMPLOYMENT ACT OF 1946: It is the responsibility of the Federal government to seek “maximum employment” CIVILIAN NONINSTITUTIONAL POPULATION (CNP) DEFINITION: Monthly Labor Review -All persons age 16 and over who are not inmates of penal or mental institutions, sanitariums, or homes for the aged, infirm or needy -This is the potential labor force -It includes students, old people and retirees EMPLOYED (E) th 1. Worked for pay any time during the week which includes the 12 day of the month 2. Worked unpaid for 15 hours or more in a family-operated business 3. Temporarily absent due to illness, vacation, etc. A person with 2 jobs is counted only once. UNEMPLOYED (U) 1. Did not work during the survey week 2. Available for work 3. Had looked for jobs within the preceding 4 weeks or 4. Did not look for work because they were laid off Persons who do not have a job, would like one, and are actively seeking a job NOT IN THE LABOR FORCE (N) Everyone in the civilian noninstitutional population who is not classified as employed or unemployed CIVILIAN LABOR FORCE (LF) = Employed + Unemployed = All employed or unemployed persons in the Civilian Noninstitutional Population = all individuals who have a job or are actively seeking work LF = E + U LF ignores people in the military UNEMPLOYMENT RATE = Number unemployed as a percentage of the labor force = (Unemployed / Labor Force) x 100% = U / LF x 100% EMPLOYMENT RATE = Number employed as a percentage of the labor force = (Number employed / labor force) x 100% = E / LF x 100% LABOR FORCE PARTICIPATION RATE = Labor force as a percentage of the civilian noninstitutional population = (Labor force / civilian noninstitutional population) x 100% = (LF / CNP) x 100% EXAMPLE: Population in 2000 = 272.8 million 1. Under 16, military, institutionalized 64.0 million 2. Employed 135.2 million 3. Unemployed 5.7 million 4. Not in labor force 67.9 million ___________ Total 272.8 million Civilian noninstitutional population = employed + unemployed + not in labor force = 135.2 million + 5.7 million + 67.9 million = 208.8 million Labor force = employed + unemployed = 135.2 million + 5.7 million = 140.7 million Unemployment rate = (unemployed / labor force) x 100% = 5.7 million / 140.7 million x 100% = .041 x 100% = 4.1% Labor force participation rate = labor force/civilian noninstitutional population x 100% = (140.7 million / 208.8 million) x 100% = .674 x 100% =67.4% SOME COSTS OF UNEMPLOYMENT 1. Individual hardship due to loss of income 2. Loss of output at the national level (lower GDP) 3. Lower standard of living 4. Lower aggregate income 5. Lower tax revenue for government 6. Increased government spending for welfare and unemployment compensation 7. Increased budget deficit 8. Increased national debt 9. Increased government borrowing 10. Increased interest payments on national debt 11. Increase in crime rates, alcoholism, suicide rates, domestic violence and social unrest PROBLEMS INVOLVED IN MEASURING THE UNEMPLOYMENT RATE 1. DISCOURAGED WORKERS People who want to work but are unable to find a job and quit looking 2. UNDEREMPLOYED WORKERS People working in jobs far beneath their skill level People working part time who want to work full time 3. UNDERGROUND ECONOMY Portion of the economy where workers are paid in cash, do not report income and do not pay taxes UNEMPLOYMENT COMPENSATION AFFECTS THE UNEMPLOYMENT RATE People can get unemployment compensation for 26 weeks.
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