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Recursion

(56,582 posts)
Fri May 22, 2015, 01:10 AM May 2015

Unemployment, discouraged workers, and labor participation in the US

Just a quick few reality checks here.

1. The US's labor force participation rate is slightly high by G-20 standards

The US's labor participation rate is 62.8%, which is slightly above average for G-20 countries. If you rank the G-20 plus, just to throw a few more industrialized countries in, Norway, the Netherlands, Denmark, Belgium, and Sweden, you get this list:

China: 71.3%
Brazil: 69.8%
Switzerland: 68.2%
Indonesia: 67.7%
Canada: 66.2%
Norway: 64.9%
Australia: 64.8%
Netherlands: 64.4%
Sweden: 64.1%
Russia: 63.7%
US: 62.8%
Denmark: 62.5%
UK: 62.1%
Mexico: 61.6%
S. Korea: 61.0%
Argentina: 60.8%
Germany: 59.9%
Japan: 59.2%
France: 55.9%
Saudi Arabia: 54.9%
India: 54.2%
Belgium: 53.3%
South Africa: 52.1%
Turkey: 49.4%
Italy: 49.1%

(We actually do "better" if you take the European countries I added out.)

2. The "Unemployment Rate" has no connection to unemployment benefits.

I've seen this a couple of times; it's one of those zombie falsehoods that keeps coming back. There is no connection between the receipt of Unemployment Insurance benefits and BLS's published unemployment rates.

http://www.bls.gov/cps/cps_htgm.pdf

BLS conducts a monthly survey of about 100,000 people and asks questions like:

1. Does anyone in this household have a business or farm?
2. Last week, did you do any work for (either) pay (or profit)?
If the answer to question 1 is "yes" and the answer to question 2 is "no," the next
question is:
3. Last week, did you do any unpaid work in the family business or farm?
For those who reply "no" to both questions 2 and 3, the next key questions used to
determine employment status are:
4. Last week, (in addition to the business) did you have a job, either full or part
time? Include any job from which you were temporarily absent.
5. Last week, were you on layoff from a job?
6. What was the main reason you were absent from work last week?
For those who respond "yes" to question 5 about being on layoff, the following
questions are asked:
7. Has your employer given you a date to return to work?
If "no," the next question is:
8. Have you been given any indication that you will be recalled to work within the
next 6 months?
If the responses to either question 7 or 8 indicate that the person expects to be
recalled from layoff, he or she is counted as unemployed. For those who were
reported as having no job or business from which they were absent or on layoff, the
next question is:
9. Have you been doing anything to find work during the last 4 weeks?
For those who say "yes," the next question is:
10. What are all of the things you have done to find work during the last 4 weeks?
If an active method of looking for work, such as those listed at the beginning of this
section, is mentioned, the following question is asked:
11. Last week, could you have started a job if one had been offered?


Based on the responses, those individuals are categorized as employed, underemployed, unemployed, or out of the labor force. A big computer program then extrapolates those data based on what the Census tells us about the national population, and they come up with six different unemployment levels:

U1: People not working, for any reason, for 15 weeks or longer (long-term unemployed)
U2: People who lost their jobs or completed temporary work
U3: People who are not working but have actively looked for a job in the past 4 weeks (this is "The Unemployment Rate ®&quot
U4: U3 + people in U2 who are not actively looking for work; "discouraged workers"
U5: Roughly, U4 + day / casual laborers
U6: U5 + people working part time who want to work full time

Currently, those rates in the US are:
U1: 2.3%
U2: 2.6%
U3: 5.4%
U4: 5.9%
U5: 6.7%
U6: 10.8%

This brings me to,

3. The rate of worker discouragement is low

U3 ("The Unemployment Rate&quot is 5.4%. U4 is U3, plus workers who are available for work but have stopped looking for work. That is 5.9%. So one half of one percent of people in the labor force would like to work but have stopped looking for work.

Now, a quick reminder of who makes up the labor force:

http://www.bls.gov/dolfaq/bls_ques23.htm

The official concepts and definitions of the labor force components used in the Current Population Survey (CPS) are described below. For a complete description, see Definitions of Labor Force Concepts.

Civilian noninstitutional population: Persons 16 years of age and older residing in the 50 states and the District of Columbia, who are not inmates of institutions (e.g., penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.

Civilian labor force: All persons in the civilian noninstitutional population classified as either employed or unemployed.

Employed persons: All persons who, during the reference week (week including the twelfth day of the month), (a) did any work as paid employees, worked in their own business or profession or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of their family, or (b) were not working but who had jobs from which they were temporarily absent. Each employed person is counted only once, even if he or she holds more than one job.

Unemployed persons: All persons who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment some time during the 4 week-period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed.

Unemployment rate: The ratio of unemployed to the civilian labor force expressed as a percent


So, everyone over 15 (even a 90-year-old) is part of the civilian labor force. (This is a hint about the G-20 numbers above: aging populations should have decreasing labor force participation rates, unless something is seriously wrong.)

Now, the 90-year-old does not count as a "discouraged" worker, because he is not "available" for work, being retired. Note that a 62-year-old who answers that he wants work is not counted as "retired", but as either "unemployed" or "discouraged" based on whether or not he has looked for work in the past four weeks. (To count as "retired", someone has to be "retired enough" that they tell the surveyor that he or she would not want a job if one were offered -- frustratingly, BLS does not have a category specifically for "retired people".) Interestingly, the average retirement age has been rising in recent years, not falling: it's up to 62 from 60.5 ten years ago.

The other big-ish category of non-labor participants is persons on disability. And this population has gone way up (sorry, 2011 was the latest chart I could find from SSA):



So, a lot more people are disabled (and, no, this isn't a "cheat the system" argument, this is a "states pay consultants to get people off TANF and UI and onto SSDI" argument), which along with the baby boom's (delayed) retirement counts for nearly all of the labor force participation drop (remember, discouraged workers are one half of one percent of the civilian labor force).

And, to throw the thornier question of SSI into the mix, which was designed as a much smaller program than SSDI but is now larger:



4. 5% of the labor force is underemployed

The gap between U3 and U6 is a huge problem: 5% of Americans over 15 want to work full time but only are offered part-time hours. This is something we really need to fix.
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Unemployment, discouraged workers, and labor participation in the US (Original Post) Recursion May 2015 OP
Great primer! tritsofme May 2015 #1
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