Consider two hypothetical countries. In Country A, 20 percent of the labor force
ID: 1198203 • Letter: C
Question
Consider two hypothetical countries. In Country A, 20 percent of the labor force is unemployed for half the year and employed for the other half; the remaining 80 percent of the labor force is never unemployed. In Country B, 100 percent of the labor force is unemployed for 10 percent of the year and employed for the other 90 percent of the year. Note that both countries have an overall unemployment rate of 10 percent.
Discuss which of these countries seems to have the more serious unemployment problem, and explain why.
Explanation / Answer
Although both the countries have an overall unemployment rate of 10%, Country B seems to have more serious unemployment because of the uncertainity factor involved all the time. Country A has a certain employment of 80% all the time, and only the remaining 20% is variable. However, Country B has an employment of 100%, but this is only uncertain and occurs 90% of the time. The uncertaininty element in case of Country B adds to its serious unempoyment problem.