Question

Suppose the unemployment rate is 6 per cent.

1. If the working-age population is 16 million and the total labour force is 10.4 million, how many people are unemployed?
2. Calculate the labour force participation rate.
3. Calculate the employment-to-population rate.
4. Use the theories of job rationing and job search to try to explain why the natural rate of unemployment in the United States is below that in Australia. What can the Australian government do to try to remedy this situation? Might these remedies be politically unpopular?

Answer 1

a. Unemployment rate is calculated as a percentage of the labour force.

6 = Number of unemployed × 100/10.4 million

0.624 million = Number of unemployed = 6.24 lakhs

b. Labour force participation rate = Total labour force/ total working age population = 10.4 × 100/ 16 = 65%.

c. Total employed = total labour force- total unemployed = 10.4 - 0.624 = 9.776 million

Total working age population = 16 million

Employment to population ratio = Total employed/ total working age population = 9.776/16 = 0.611