Employment vs Unemployment Rate

Employment vs Unemployment Rate

Subject – Economy

Context – Uttar Pradesh Chief Minister stated that the unemployment rate in the state was more than 17 per cent in the year 2016 and had now come down to four to five per cent.

Concept –

• The Labour Force consists of persons who are of 15 years of age or more and are either of the following two categories:
  • are employed
  • are unemployed and are willing to work and are actively looking for a job
• In other words, the Labour Force Participation Rate (or LFPR)essentially provides the percentage of the working-age (15 years or more) population that is asking for a job;
  • It represents the “demand” for jobs in an economy.
  • It includes those who are employed and those who are unemployed.
• The Unemployment Rate (UER) is nothing but the number of unemployed as a proportion of the labour force.
• The Employment Rate (ER) is a combination of the UER and the LFPR. The ER refers to the number of employed people as a percentage of the working-age population.
• Lower employment rates do not signal lots of new jobs, rather fewer people demanding them.
• LFPR in India is much lower than in other large economies. Often a fall in UER is a reflection of a fall in LFPR. Alow LFPR reflects poorly on the state of the economy.