The most common method of measuring unemployment was developed in the U.S. in the 1930s; it is followed by many other countries on the recommendation of the International Labor Organization. In a monthly survey of a sample of households representing the entire civilian population, information is obtained about the activity of each person of working age (16 years of age or older in the U.S.).
To ensure precision and ease of recollection, the interviewers ask what people were doing in a single week. A person who did any work during that week for pay or profit, worked 15 hours or more as an unpaid worker in a family business, or had a job from which he or she was temporarily absent, is counted as employed. A person who was not working but was looking for work or was on a temporary layoff and available to take a job is counted as unemployed.
The number of unemployed is then divided by the number of people in the civilian labor force (that is, the sum of the employed and the unemployed) in order to calculate the unemployment rate. In the U.S., statistics for states and local areas are based partly on the same survey and partly on estimates of unemployment built up from unemployment-insurance records; these records, however, do not include all the unemployed, since many people who are seeking work are not eligible to receive unemployment compensation (see Unemployment Insurance).
In some countries, instead of a special survey, unemployment estimates are developed from data on the number of people who are looking for work through the public employment offices or the number receiving unemployment compensation
Economists have described the causes of unemployment as frictional, seasonal, structural, and cyclical. Frictional unemployment arises because workers seeking jobs do not find them immediately; while looking for work they are counted as unemployed. Friction in this case refers to the incongruity between the demand for and supply of labor.
The amount of frictional unemployment depends on the frequency with which workers change jobs and the time it takes to find new ones. Job changes occur often in the U.S.: A January 1983 survey showed that more than 25 percent of all workers had been with their current employers one year or less. About a quarter of those unemployed at any particular time are employed one month later.
This means that a considerable degree of unemployment in the U.S. is frictional and lasts only a short time. This type of unemployment could be reduced somewhat by more efficient placement services. When workers are free to quit their jobs, however, some frictional unemployment will always be present.
Seasonal unemployment occurs when industries have a slow season, such as construction and other outdoor work in winter. It also occurs at the end of the school year in June, when large numbers of students and graduates look for work. At its seasonal high point (January and February), unemployment in the U.S. between 1976 and 1986 was typically 20 percent higher than at the seasonal low (October).
Structural unemployment arises from an imbalance between the kinds of workers wanted by employers and the kinds of workers looking for jobs. The imbalances may be caused by inadequacy in skills, location, or personal characteristics. Technological developments, for example, necessitate new skills in many industries, leaving those workers who have outdated skills without a job. A plant in a declining industry may close down or move to another area, throwing out of work those employees who are unable or unwilling to move.
Workers with inadequate education or training and young workers with little or no experience may be unable to get jobs because employers believe that these employees would not produce enough to be worth paying the legal minimum wage or the rate agreed on with the union. On the other hand, even highly trained workers can be unemployed; this happened in the U.S. in the early 1970s, for example, when the large numbers of new graduates with doctoral degrees in physics and mathematics exceeded the number of jobs available in those fields.
If employers practice illegal job discrimination against any group because of sex, race, religion, age, or national origin, a high unemployment rate for these workers could result even when jobs are plentiful. Structural unemployment shows up most prominently in some cities, in some occupations or industries, for those with below-average educational attainments, and for some other groups in the labor force.
In June 1992, for example, when the U.S. civilian unemployment rate was 7.8 percent, the rate in the state of New York was 9.2 percent; for teenagers 16 to 19, 23.6 percent; for black workers, 14.9 percent; and for retail workers, 9.2 percent.
Cyclical unemployment results from a general lack of demand for labor. When the business cycle turns downward, demand for goods and services drops; consequently, workers are laid off. In the 19th century, the U.S. experienced depressions roughly every 20 years. A long and severe depression occurred in the 1890s, when unemployment reached about 18 percent of the civilian labor force, and four less-severe depressions occurred in the first quarter of the 20th century. The worst depression in U.S. history was in the 1930s; at its height, one worker in four was unemployed, and some remained out of work for years. See Business Cycle.
As a result of this depression, the U.S. government took steps to alleviate unemployment. In the mid-1930s millions of jobs were provided by public works and other special programs. Notable among the federal agencies established to carry out these programs were the Civilian Conservation Corps and the National Youth Administration, which employed young workers on a wide variety of projects; and the Work Projects Administration, which embarked on a broad program involving both public-works construction and cultural and recreational activities.
Another New Deal measure was the Social Security Act of 1935, which set up the first comprehensive social-insurance system in the U.S. (see Social Security). It introduced unemployment insurance, providing workers who lose their jobs with a weekly compensation payment. By maintaining the workers' purchasing power, unemployment insurance reduces cyclical swings in demand, thus helping trade and industry.
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