What Is The Formula To Calculate The Unemployment Rate?

The unemployment rate is an indicator that, in the Economy, allows us to know the unemployment rate, that is, the number of people who, having the necessary conditions of age, health, and willingness to work, are not currently occupying a job. So it is very important to calculate the Unemployment Rate.

In other words, this rate is the economic index that shows what is the percentage of unemployment of the economically active population of a country or a society.

Thus, it can be inferred that the unemployment rate allows determining the number of people who have the condition to be employed in a job and are actively looking for it, but who are still unemployed.

Knowing the level of unemployment in a country is extremely important in any country since it will allow designing and developing the necessary measures to minimize this rate and provide support to the population that manifests this condition.

This is a term that usually varies according to the definition given to the concepts of occupation and unemployment, in the same way, it is also determined by the way in which each country collects the data for its calculation, but generally its variation not very relevant.

Causes and consequences of unemployment

Before knowing its formula and explaining how it is applied, it is important to know what are the causes of unemployment for people with conditions necessary to work, these are:

  • Lack of previous work experience
  • Have no technological training
  • Lack of adequate academic preparation
  • Economic situations in the country, generally related to inflation, stagflation, hyperinflation, or other similar processes.
  • The economic instability of the region and the productive market
  • Climate conditions
  • Reasons for a personal nature by potential workers
  • There is no investment in the productive sector of the region or the country

Each one of these causes makes a socioeconomic problem in the country and even in the region, which, if not properly and timely addressed, can generate serious consequences.

In the economic field, it can generate an unnecessary waste of scarce and very valuable resources, in the social aspect, the problem can include family matters, which include a feeling of suffering, pain, and discomfort, due to the impotence of not obtaining sufficient income to maintain the quality of life they want or expect.

Types of unemployment

However, these conditions can generate various types of unemployment, including the following:

  • Unemployment by initiation: it can be of two types, the one that occurs when the person wants or needs to start their working life, this occurs before being employed in their first job; and what happens when a worker is waiting to be called from a new job; Generally, students in the internship period and those who are just graduating form this group of unemployed.
  • Structural unemployment: in this case the potential workers do not meet the minimum requirements to be employed in the vacancies offered by the employers, in this case people with no academic, technological, or work experience are usually found.
  • Situation unemployment: this is very common in countries with high levels of inflation or economic recession.
  • Cyclical unemployment: it is generated by cyclical periods in the economy of a region or in the country where they occur.
  • Frictional unemployment: This obeys the personal aspirations of potential workers. Everything regarding his personal development, for this reason, it is usually something temporary or transitory.
  • Seasonal unemployment: It is the country’s stations that cause this type of unemployment. They generally cover temporary employment groups by region, for example fruit harvesting.
  • Long-term unemployment: This occurs when you exceed 6 months of unemployment. In these cases, it is important to identify the causes, since, being psychological, it can develop in other family or social situations.

Calculate the Unemployment Rate

This indicator is calculated very easily, it only requires identifying the following values:

  • Unemployed population or No. of Unemployed
  • Employed population or No. of Employed Workers

The sum of both values ​​makes up the value of the economically active age population, or Active Population.

Formula to calculate the unemployment rate

The formula to calculate the unemployment rate is:

Unemployment Rate = (No. Unemployed / No. Active Population) * 100

For example, for:

Unemployed: 10,000,000
No. of Employed Workers: 35,000,000
Active Population Number: (10,000,000 + 35,000,000) = 45,000,000

Applying the Formula to Calculate the Unemployment Rate

Unemployment Rate = (10,000,000 / 45,000,000) * 100

Unemployment Rate = (0.2222) * 100

Unemployment Rate = 22.22%

In other words, 22.22% of the population of this country is unemployed, while 77.78% have active work.

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Ahmed Ismail

I'm a Civil Engineer. I like reading everything related to Business so I decided to launch the "Fast Grow Company" website to help Entrepreneurs in their business journey. Keep updated and follow us.

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