What is the Formula to Calculate the Unemployment Rate?

The unemployment rate is an indicator that, in the economy, allows knowing the unemployment rate, that is, the number of people who having the necessary conditions of age, health and disposition to be employed, they are not currently occupying a position of job.

In other words, this rate is the economic index that shows the unemployment percentage of the economically active population of a country or 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 actively seek it but still continue under a condition of unemployment.

Knowing the unemployment level of a country is extremely important in any country, since it will allow to design and develop 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, also It is determined by the way in which each country collects the data for its calculation, but in general its variation is 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 that cause unemployment of people with the necessary conditions to work, these are:

• Lack of previous work experience
• Not having technological training
• Lack of adequate academic preparation
• Economic situations in the country, generally related to inflation, stagflation, hyperinflation or other similar processes
• Economic instability in the region and the productive market
• Climate conditions
• Reasons of a personal nature on the part of potential workers
• There is no investment in the productive sector of the region or the country

Each of these causes causes a socioeconomic problem in the country and even in the region that, if not addressed adequately and on time, 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 nuclei, to those that clothe a feeling of suffering, anguish and discomfort, due to the impotence of not obtaining enough income to maintain the quality of life they want or are waiting.

Types of unemployment

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

1. Initiation unemployment: 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; In general, internship students and those just graduating make up this group of unemployed.
2. Structural unemployment: in this case the potential workers do not meet the minimum requirements to be employed in the vacancies offered by employers, in this case you usually find people who do not have academic, technological or experience preparation labor.
3. Current unemployment: this is very common in countries with high levels of inflation or economic recession.
4. Cyclical unemployment: it is generated by cyclical periods in the economy of a region or in the country where they occur.
5. Frictional unemployment: This is due to the personal aspirations of potential workers. Everything regarding their personal development, for this reason it is usually something temporary or transitory.
6. Seasonal unemployment: It is the seasons of the country that cause this type of unemployment. They generally encompass temporary job groups by region, for example fruit picking jobs.
7. Long-term unemployment: Occurs when unemployment exceeds 6 months. In these cases, it is important to identify the causes since, if they are psychological, they can become other family or social situations.

Calculation of 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 for calculating the unemployment rate

The formula to calculate the unemployment rate is:

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

For example, to:

• No. Unemployed: 10,000,000
• No. Employed Workers: 35,000,000
• No. of Active Population: (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.