96 Who Counts in Unemployment?
What you’ll learn to do: describe and calculate unemployment
In this section, we’ll examine unemployment. First, we’ll take a look at what it is, how it it measured, and general trends over time.
Learning Objectives
- Define and differentiate between employed, unemployed, and being in or out of the labor force
The Cost of Unemployment
Unemployment can be a terrible and wrenching life experience—like a serious automobile accident or a messy divorce—whose consequences can be fully understood only by someone who has gone through it. For unemployed individuals and their families, there is the day-to-day financial stress of not knowing where the next paycheck is coming from. There are painful adjustments, like watching your savings account dwindle, selling a car and buying a cheaper one, or moving to a less expensive place to live. Even when the unemployed person finds a new job, it may pay less than the previous one. For many people, their job is an important part of their self worth. When unemployment separates people from the workforce, it can affect family relationships as well as mental and physical health.
The human costs of unemployment alone would justify making a low level of unemployment an important public policy priority. But unemployment also includes economic costs to the broader society. When millions of unemployed but willing workers cannot find jobs, an economic resource is going unused. An economy with high unemployment is like a company operating with a functional but unused factory. The opportunity cost of unemployment is the output that could have been produced by the unemployed workers.
Calculating Unemployment
Unemployment is typically described in newspaper or television reports as a percentage or a rate. A report might say, for example, from January 2013 to December 2013, the U.S. unemployment rate dropped from 8.0% to 6.7%, and by the close of 2015, it had fallen to 5.0%. At a glance, the changes between the percentages may seem small. But remember that the U.S. economy has over 160 million adults who either have jobs or are looking for them. A rise or fall of just 0.1% in the unemployment rate of 160 million potential workers translates into 160,000 people, which is roughly the total population of a city like Syracuse, New York, Brownsville, Texas, or Pasadena, California. Large rises in the unemployment rate mean large numbers of job losses. The decrease in unemployment from 8% in 6.7% 2013 meant an additional 2.02 million people were employed who had previously been looking for work.
Link It Up
The Bureau of Labor Statistics tracks and reports all data related to unemployment.
Who’s In or Out of the Labor Force?
Should everyone without a job be counted as unemployed? Of course not. Children, for example, should not be counted as unemployed. Surely, the retired should not be counted as unemployed. Many full-time college students have only a part-time job, or no job at all, but it seems inappro