Run on East Side Bank, N.Y. 1912 February 16. Bain News Service via Library of Congress.

Why You Can’t Trust Unemployment Rates

Forrest ChristianCareers, Financial crisis Leave a Comment

In comparing this current collapse to 1929-1932, you hear economists talk about how the unemployment rates are so different. Back then, almost a quarter of the workforce was out of work. Today, the number is still below 7%. (I’m America, so these arguments are all US-based.)

There’s a problem with this thinking, because the current unemployment statistics no longer adequately measure the number of people currently without work who want a job.

Take, for example, my pal, Ahmed. He’s worked since 1991, and has been without any work or income for over 1/3 of that time. But he’s only been unemployed for two weeks.

Ahmed is part of the weird independent contractor economy. He left two jobs to follow his wife’s career. He was laid off from another (where he was counted as unemployed). The other positions were all independent contractor. He never wanted that type of life but his wife had demands for her career and once Ahmed got into the rut, no one in their right mind would hire him for a permanent position. So although he lacked any form of work or income, he was never unemployed because, at least in America, “unemployed” has a particular technical meaning.

And that’s true in many nations because governments have a big interest in saying that this number is small.

And it’s not just independent contractors who are among the uncounted unemployed.

Who Is “Unemployed”

As you probably know, America has incarcerated 1 of every 31 adult residents (3.2%) according to the US DoJ (Dec. 2007). These people are not unemployed.

People who have never been able to find work are not “unemployed”. In the US, this is a large part of the African-American population under 25 years old.

Persons who were counted as “unemployed” but have now exhausted their unemployment benefits without finding a job, and are still looking, are not “unemployed”.

Persons who have given up on getting work are not “unemployed”.

Women who drop out of the work market because it no longer is cost-effective to pay for childcare are not counted.

Last, persons who have part-time minimum wage jobs but want full-time employment are “underemployed” and therefore not “unemployed”. A very effective way to reduce the cost of employees is to hire “part-time” and then work these individuals more than the legally allowable hours, because you do not have to provide many of the employer-paid benefits for them. Including paying the unemployment insurance tax for them.

Why This Is Important

When you see your local statistics, you aren’t getting the full picture. You are seeing a mostly meaningless number, which will get more meaningless after those caught redundant in the coming layoffs have exhausted their unemployment benefits. The real level of those without work who want it will be much higher. It is unlikely to approach 1933 levels but it can approach 1978, which probably represented the last decade the unemployment numbers were reasonably calculated.

Get working on your career now, before bad times happen to you. Prepare and be ready. People will need what you have to offer if they can see it.

Image Credit: Run on East Side Bank, N.Y. 1912 February 16. Bain News Service via Library of Congress.

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