Question

Suppose that the population over age 16 (adult population) is 150 million and the number of discouraged workers is 5 million. Moreover, in the month of November 2019, the number of people with full-time jobs was 70 million, and the number of people with part-time jobs was 5 million. The labour force was 90 million.

Suppose that the adult population, the number of discouraged workers, and the number of people in the labour force did not change in December 2019. However, the annual survey of households found 5 million more people at work in December 2019 than in November 2019. Moreover, the labour department reported that 75% of the new jobs were only part-time.

(a) Calculate the unemployment rate in December 2019.

(b) Does the creation of part-time jobs affect unemployment in the same way as the creation of full-time jobs? Please justify your answer in one to three sentences.

Answer 1

(a)

In November 2019

Labor force = 90 million

Full time jobs = 70 million

Part-time jobs = 5 million

Employed = Full time jobs + Part time jobs = 70 million + 5 million = 75 million

Unemployed = labor force - employed = 90 million - 75 million = 15 million

In December 2019, labor force does not change.

Labor force in december 2019 = 90 million

But 5 million more workers get work. The 75% of these new jobs created are part time jobs.

So,

Increase in part time jobs = 5 million * 0.75 = 3.75 million

Increase in full time jobs = 5 million * 0.25 = 1.25 million

Calculate the number of employed -

Number of employed = Full time jobs + Part time jobs + Increase in full time jobs + Increase in part time jobs

Number of employed = 70 million + 5 million + 1.25 million + 3.75 million = 80 million

Number of unemployed = Labor force - number of employed = 90 million - 80 million = 10 million

Calculate the unemployment rate -

Unemployment rate = [Unemployed/Labor force] * 100

Unemployment rate = [10 million/90 million] * 100 = 11.11%

Thus,

The unemployment rate in December 2019 was 11.11%

(b)

Both part-time workers and full-time workers are counted as employed.

So, either full time jobs increases or the part time jobs increases, it is said that number of employed has increased.

Given the labor force, an increase in number of employed results in a decrease in number of unemployed which, in turn, results in a decrease in unemployment rate.

So, the creation of part-time affects the unemployment in same way as the creation of full time jobs.