Limitations of Unemployment
Economics: IB Diploma, topic 2.3.2
The Limitations of Unemployment as a Measure
By grouping individuals into three categories (employed, unemployed, and out of the labor force), people can be mislabeled. This reduces the reliability of unemployment as an economic indicator.
Hidden unemployment
- There are some people who have only part-time or temporary jobs, but are looking for full time and permanent employment. These people are counted as employed, even though they are not employed in the way they would like or need to be.
- Additionally, there are individuals who are underemployed.
- This includes those who are trained or skilled for one type or level of work but are working in a lower-paying job or one that does not utilize their skills.
Discouraged workers
- Discouraged workers, those who have stopped looking for employment and are therefore no longer counted in the unemployed, also contribute to hidden unemployment.
- This includes people who do not have jobs and would be available to work, but are discouraged by the lack of available jobs in their area and have stopped looking.
- These people, and their families, may be suffering the pains of unemployment. But they are not reflected in the unemployment rate.
Test yourself on Limitations of Unemployment
What does this definition describe?
Those who have stopped looking for employment and, hence, are no longer counted as unemployed.What does this definition describe?
Those who are trained or skilled for one type or level of work but are working in a lower-paying job or one that does not utilize their skills.