Introduction: The President's Council of Economic Advisers uses the following process to measure unemployment. Persons are classified as unemployed if they were not employed during the survey week, but were able to work, available for work, made a specific effort to find a job at some time within the preceding four weeks, or if they were waiting either to report to a new job within 30 days or be recalled to a job from which they were laid off. This weekly survey and classification process determines the unemployment rate. There is a very large sample, which ensures the data collected by the Department of Labor are reasonably reliable. But most researchers know that these statistics are not completely accurate. This is due to two distinct groups, discouraged workers and dishonest non-workers, which fluctuate in size.

DISCOURAGED WORKERS are individuals who would love to go back to work, but due to the length of time being unemployed, low self-esteem, or many job application rejections, they have given up on looking for a new job. These individuals are beyond the four-week cutoff for counting them as unemployed, thus the real rate of unemployment is underestimated.

DISHONEST NON-WORKERS are individuals who say they are looking for employment, thus being eligible for unemployment compensation, although they have no real intention of taking a new job. Therefore, because of this group, the real rate of unemployment is overestimated.

Ask yourself why and when (under what circumstances) the sizes of these groups might be larger or smaller.

Basic Classifications of Unemployment 1. FRICTIONAL UNEMPLOYMENT is when unemployment happens naturally. That is, there are some people who quit their jobs because they do not like them, and some people seek to re-enter the job market (like mothers after leaving a job to have children). 2. STRUCTURAL UNEMPLOYMENT occurs when the skills of the potential employee no longer match the needs of potential employers. Technological changes may have made an employee's skills and talents obsolete: For example, someone who specialized in automotive carburetor repair is in less demand today because most cars are fuel-injected. 3. SEASONAL UNEMPLOYMENT happens because some products/businesses are in demand during only part of the year. The construction business in the northern states and agriculture harvesting in many states are good examples. When business is not being conducted, the demand for employees drops considerably. 4. CYCLICAL UNEMPLOYMENT is a result of the business cycles referred to earlier. There is a seemingly natural cycle of good economic times and poor times. During these poor times of recession or depression, businesses decrease their outputs, which require fewer employees, thus causing an increase in unemployment. 5. INDUCED UNEMPLOYMENT is caused by governmental policy. A prime example is the national minimum wage law. The minimum wage law prevents businesses from hiring workers who would otherwise work for less pay than the government law requires.

questions:

Directions: In a strong paragraph explain

1. How does an increase in unemployment negatively affect our government?

2. When a business finds it necessary to layoff some employees (due to slowing sales), what positive effects might this have for the business?

3. Mr. Smith was disabled in a car accident in 1995 and has not been able to work since. Is Mr. Smith included in the unemployment statistics? Why or why not?

4. Explain how dishonest workers and discouraged workers affect employment statistics.

5. For the following situations, identify the type of unemployment each represents.

a. Because of the decline in the U.S. birth rate, baby clothes manufacturers are laying off workers. b. Bill decided to relocate to Texas. He quit his present job and found a new job in Texas three weeks later. c. As interest rates continue to rise, the sale of new homes decreases. This has caused an increase of unemployed construction workers. d. As the fall harvest ends, agriculture unemployment increases. e. Janet worked in the drive-up window of a bank. The bank has installed an automated teller machine and has closed the drive-up window. Janet's job no longer exists, so she has to start looking for another job. f. The state of Missouri has enacted a law stating that no one under the age of 21 can work in an establishment that sells liquor. Mark, an 18-year-old, was working as a waiter in a restaurant that sells alcoholic beverages. He can no longer work at the restaurant.