Does the unemployment rate, conventionally measured, overestimate or underestimate unemployment?
*Overestimate b/c discouraged workers*Underestimate b/c ppl want better jobs*We assume it usually overestimates b/c number of discouraged workers > number of ppl waiting for better jobs
Conventional measures of unemployment usually include people who are actively seeking work but are currently unemployed. Therefore, the unemployment rate tends to underestimate the actual number of people who are jobless. This is because some people may have given up looking for work and have dropped out of the labor force altogether. These people are not counted as unemployed in the official unemployment rate, but they are still jobless.
Moreover, the conventional measures of unemployment may not capture the true extent of underemployment or part-time employment. Some workers may be working part-time because they cannot find full-time work, while others may be working in jobs that are below their skill or education levels. These individuals may not be counted as unemployed but are not fully utilized in the labor market.
Therefore, while conventional measures of unemployment are useful for assessing the state of the economy and labor market, they do not capture the full extent of joblessness and underemployment.
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