AFE 1303AFE – Calculation of labour force participation

Question 1A (5 marks)The table below reports some labour market figures for a hypothetical country, Blefuscu in 2005. Assume that there are only two types of employment: full time and part time. Everyone who is not employed is unemployed. Calculate the Labour force participation and ii) unemployment rate. Show all your calculations. (5 marks)Population850,000Working age population400,000Number of people Not in the labour force50,500Part-time employment as a percentage of total employment15%Number of full-time employees201,451Rate of underemployment2%Question 1B (5 marks)The government of Blefuscu announces that the unemployment rate fell from 2005 to 2006. The government says this is positive news as it shows more jobs are being created and less people are unemployed. The labour unions, on the other hand, disagreed with this assessment and stated that they could find no evidence that additional jobs have been created between 2005 and 2006.Your task is to explain how the unemployment rate can fall even if there are no new jobs being created. First, using the numbers you have been given in 1A as the 2005 figures, fill in the table below by developing a set of numbers that show how the unemployment rate can fall even if there are no new jobs being created. Assume no change between 2005 and 2006 in the population, percentage of part time workers and working age population. Second, discuss in detail how the numbers show the unemployment rate can fall even if there are no new jobs being created. List two possible reasons why this may occur. Year20052006Population850,000850,000Working age population400,000400,000Number of people Not in the labour force50,500______Part-time employment as a percentage of total employment15%___%Number of full-time employees201,451_____Rate of underemployment2%___%