Last modified on 13 August 2013, at 21:24

Macroeconomics/Definitions of Unemployment

Unemployment has several definitions, one being those members of the population that are actively looking for work and have not found it in a certain period. The main problem with this definition is that people who become disappointed and are no longer activelylooking for a job are not counted as unemployed even though they might still want to work. The way unemployment is measured also has several versions. Some are using official payroll numbers of hirings and firings, others use the number of people who apply for unemployment benefits. Other methods include sampling through phone calls, etc that inquire if any able members of the household are unemployed and looking for work. The informal sector of the economy also create problems since these are done mainly by estimates. Economists use a term called NAIRU (Non Accelerating Inflation Rate of Unemployment) which attempts to establish a level of unemployment such that reducing the level would create a shortage of available labor causing upward pressure on wages and potentially generating inflation.