Practice Problems for Employment

1. In a country with an adult population of 50 people, 40 people are in the labor force, and
35 people are employed. Calculate the EPR, LFPR, and unemployment rate.

2. “Sagawa Express Co. said it planned to hire 10,000 housewives as part-time workers in
the next two years. . . . The plan . . . could offer an example of how Japan’s economy
would be boosted by . . . Prime Minister Shinzo Abe’s ‘womenomics’ policy. . .

Sagawa, one of Japan’s largest parcel-delivery companies, wants extra delivery workers
during the late-morning hours, around the time when housewives have sent their
children to school and have some free time, said spokesman Mabuki Yamaguchi.” –
Yoko Sudo, WSJ

Suppose that Sagawa does hire 10,000 people who were formerly not working and not
looking for work. How would this impact the LFPR, EPR, and unemployment rate
(Remember that if the numerator and denominator go up/down the same amount then
the number goes up/down.)

3. Steve quit his job as an Ec10 TF and is considering a few new teaching options. Steve’s
dad cannot find work as a janitor despite sending in many applications and it looks like
the minimum wage is to blame. Steve’s brother cannot find work as a construction
worker because the economy has been weak due to the recession. Which type of
unemployment applies to each worker?

4. List some reasons why paying people higher wages would cause them to have higher
productivity. (Hint: read pages 610-612). What do we call these “higher wages?”

5. True/False: “Efficiency wages, minimum-wages, and strong unions are all good ways of
protecting workers and reducing structural unemployment”

6. Monster.com is a website that helps people search for a job. In theory this could
increase the speed at which laid off workers get matched to a new job. What kind of
unemployment would that reduce?

7. Which of these polices that could reduce the natural rate of unemployment? Which
would make it higher?

Raise the minimum wage to boost employee morale

Cutting unemployment insurance benefits
Improving education so people have more skills when they start looking for jobs
Making it harder to qualify as “disabled” (i.e. unable to work)
Reducing union power by passing “right to work” laws
8. Is it possible for a larger percentage of the population to be working this year compared
to last and yet unemployment is also higher than the year before? Explain how it is
possible briefly or explain why it is impossible. (Yes, this is a leading question—leading
you to profound insights!)

9. (a) Suppose that a lot of people who were unemployed and looking for work give up
hope and stop looking. What happens to the LFPR, EPR and UE rate?

(b) Due to a crippling new mental illness many men in their 30s and 40s go on disability
and leave the workforce. You can assume all of these people used to be unemployed.
What happens to LFPR, EPR and UE rate?

(c) How it is possible for both the EPR and UE rate go up at the same time? Be very
concise.