ABSTRACT
W ith the dramatic rise in unemployment after 2007 has come a renewed interest in understanding both the measurement and-more importantly-the causes of unemployment. As noted in chapter 2, the population can be divided into those people who are in the
labor force (L) and those who are not (N). The labor force consists of those
people who are employed (E) and those who are unemployed but would
like to be employed (U). The concept of unemployment is somewhat ambig-
uous, since, in theory, virtually anyone would be willing to be employed in
return for a generous enough compensation package. Economists tend to
resolve this dilemma by defining unemployment in terms of an individual’s
willingness to be employed at some prevailing market wage. Government
statistics take a more pragmatic approach, defining the unemployed as
those who are on temporary layoff waiting to be recalled by their previous
employer, or those without a job who have actively searched for work in
the previous month (of course, “actively” is not precisely defined).
