Principles of Macroeconomics / Unit 5 MAC 0407 worked example, 60 to 90 seconds
Classifying a Person
The idea
To classify someone, ask two questions in order. Did they do any paid work in the reference week, even an hour, or fifteen or more unpaid hours in a family business, or were they temporarily away from a job they hold? If yes, they are employed. If no, did they make a specific active effort to find work in the four weeks ending with that week, and are they available to start? Only if both are true are they unemployed. Anyone else is out of the labor force.
In practice
Worked example: a graduate sending applications weekly is unemployed. A person who looked for months, gave up, and has not applied recently is out of the labor force. Someone working ten hours a week who wants forty is employed. A student not seeking work is out of the labor force. Someone on temporary layoff expecting recall is unemployed without having to search.
Where people slip
Wanting a job is not enough, and neither is needing one. The test is a specific act of searching within four weeks, which is why people can move between unemployed and out of the labor force without their situation changing.
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Builds on
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