How does the unemployment rate rises when the discouraged workers join the labour force ..please explain with example
Share
Please briefly explain why you feel this question should be reported.
Please briefly explain why you feel this answer should be reported.
Please briefly explain why you feel this user should be reported.
Hii,
when the business cycle is in the early expansion stage at that time the business start gaining momentum in a way that their requirement for labour increases to meet the market demand for their product.
Now, Discouraged workers are those who left the labour force back then when they were searching for employment opportunities but didn’t get any.
Now, during the expansion when these discouraged workers look at the increased labour requirements they again enter the labour force to grab the prevailing opportunities in the market.
Hope This Helps.!
The discouraged workers are workers who can look for a job but decide not to look for a job.
When the economy show signs of expansion, the discouraged worker category starts to look for a job. So now they are a part of the labour force because labour force includes people who are either employed or actively seeking employment.
Because of this the labour force rises and not all of them get employed instantly. So accordingly the number of people unemployed rises initially leading to higher unemployment rate.
For example: Currently Labour Force is 400 and unemployed people are 50
So, unemployment rate = 50/400 = 12.5%
Now suppose 50 discouraged workers joins the labour force and only 10 of them get employed.
So, Labour Force rises to = 400+50= 450 and unemployed people rises to = 50+40 = 90.
So, unemployment rate = 90/450 = 20%
Unemployment rate= No. of people unemployed out of the labour force/Labour force
Unemployment rate is a lag indicator. Which means it shows the effects later.
So when there are early signs of expansion, then the workers who were discouraged before and were not getting job in bad times are positive about the future now and they join the labour force in a hope of seeking job. Now, people who were unemployed earlier will start actively looking for jobs during early signs of expansion but actually that time the unemployed people will be so high that initially the unemployment rate will rise (You can think of there is more supply of workers than the actual jobs available in the economy) but in some time the unemployment rate will rise they start finding jobs.
Thank you for your response!