Tuesday, December 15, 2015

What is the importance of changes in the ratio of full to part time employment in assessing changes in the unemployment rate?

A change in the ratio of full-time to part-time employment
makes no difference in a country's unemployment rate.  However, such a change would
certainly affect how we should assess the strength of the
economy.


The unemployment rate in a country does not
distinguish between full-time and part-time workers.  Anyone who has a paid job of any
sort is employed.  Therefore, an economy where half of the labor force works part-time
could have the same unemployment rate as if none of the labor force worked part-time (so
long as the same percent of all workers in the labor force had a
job).


Of course, the economy with fewer part-time jobs
would most likely be the healthier economy.  Therefore, when there is a change in this
ratio, we should assess the unemployment rate differently.  We should note that a change
to a higher part-time to full-time ratio would typically mean that an economy is
struggling, even if the actual unmployment rate remains
unchanged.

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