The True Rate of Unemployment
lisep.org
lisep.org
So many discussions online about unemployment take a framing like this, implying not so subtly that the government is lying about what unemployment _actually_ is. But the feds are publishing all of this data and being transparent about it. Nothing about having some arbitrary cap at salaries below 25,000 make this a “truer” metric.
Here is the table of 2023 averages by state for each of these six rates:
https://www.bls.gov/lau/stalt.htm
The "True unemployment rate" from the link is basically U-6, except they use $25k as a cutoff to define marginally attached workers. It isn't immediately obvious how BLS defines marginally attached workers, so that might be different. It's not some government secret!
I think you could certainly call these people "poor", but not unemployed. That word means something different.
Sure the term might not be ideal but it serves a purpose. Living in the current US with 24k a year is miserable (more or less depending on location).
When people bring up unemployment in terms of public policy, they generally are discussing actionable problems. Like "the unemployment rate is 6% so the gov should make incentives to hire more people".
These discussions could (ought to) include people that can't afford a car in the non-walkable US, or who have to live with relatives or roommates because affordable housing is a fantasy. "Maybe someone working full time should be able to afford their own place and eat more than rice and ramen"
Someone making 15k a year working 40 hours is functionlly unemployed, in every sense of the phrase imo
We have a much better metric for that though, which is the poverty rate.
You can be employed and in poverty and you can be unemployed and not be in poverty. You can even be earning less than a living wage and be out of poverty if you have savings or other financial assistance from family, etc.
Tracking unemployment for what it is makes sense. Muddling the term doesn’t.
So like, to make those people earning under 24k get a second job?
I don't see how you can use unemployment rate to justify making jobs when it already includes people who have jobs. The two need to be split up so the real number can be used for that argument.
I’m sure a sizable portion of them are students.
> The CPS does not determine whether workers are covered by the minimum wage provisions of the federal Fair Labor Standards Act (FLSA) or by individual state or local minimum wage laws. The estimates of workers paid at or below the federal minimum wage are based solely on the hourly wage that respondents report (which does not include overtime pay, tips, or commissions). It should be noted that some respondents might round their hourly earnings when answering survey questions. As a result, some workers might be reported as having hourly earnings above or below the federal minimum wage when, in fact, they earn the minimum wage.
> Some workers reported as earning at or below the prevailing federal minimum wage may not in fact be covered by federal or state minimum wage laws because of exclusions and exemptions in the statutes. Thus, the presence of workers with hourly earnings below the federal minimum wage does not necessarily indicate violations of the FLSA or state statutes in cases where such standards apply.
> Estimates of the number of minimum wage workers in this report pertain only to workers who are paid hourly rates. Salaried workers and other workers who are not paid by the hour are excluded, even though some have earnings that, if converted to hourly rates, would be at or below the federal minimum wage. Consequently, the estimates presented in this report likely underestimate the actual number of workers with hourly earnings at or below the minimum wage. BLS does not routinely estimate the hourly earnings of workers not paid by the hour because of data quality concerns associated with constructing such an estimate.
> Several states have established minimum wage rates that exceed the federal level. (Information on state minimum wage laws is available at https://www.dol.gov/agencies/whd/minimum-wage/state.) Users should be cautious about comparing state estimates with CPS estimates in this report because of differing statutory minimum wages. It also should be noted that the CPS sample is based on residence; workers report their earnings on their job, which may not be located in the same state in which they live. In addition, the degree of sampling error may be quite large for some state estimates.
Also, tracking poverty is more meaningful than tracking underemployment. There are millions of stay at home parents in this country who would qualify as underemployed, but who aren't in poverty because their spouse or possibly other family member supports them.
I’d even be fine with “better”.
1. Rent is a few hundred dollars a month
2. No car, use mass transit
3. Single
4. Work less than 40 hours a week in a job they enjoy....
At that income level, taxes are pretty close to zero (including FICA) because of the Earned Income Tax Credit.
Are Americans prospering? Can they afford minimum needs like food and housing? Is the average American quality of life remaining consistent or increasing?
I want to see America as a whole do better and sometimes I wonder if stats are being deliberately reported in a way that obscures the truth of the matter.
There's a whole zoo of alternatives, but I don't know if anyone takes them seriously.
Human Development Index (HDI)
Genuine Progress Indicator (GPI)
Better Life Index (BLI)
Gross National Happiness (GNH)
There may not be money, but there will be some economy for services and non-physical goods.
And in a post scarcity world, why would having more than your peers confer social status to any degree, nonetheless enough to justify the various drawbacks of laboring for such possessions?
Only because they cannot get everything they need from the people they want to spend time with, so they have to trade outside that group.
This game begins all the way when kids are deciding who to sit next to at lunch in elementary school. It’s a simple fact that time and attention are limited, so there have to be cuts made once demand exceeds supply.
Actually, it might even begin earlier, as I currently have a breastfeeding toddler who is always keeping an eye on who his mom is allocating her time to, and ensures that he is number one…much to the chagrin of his sister and me.
Again, that is not what the term social status refers to, nor is it the goal of most people's labor, nor is it something that would logically be acquired by labor.
Your breastfeeding toddler does not wish to monopolize your partner's time because of her high social status which was elevated by her labor; he wants a secure source of food. Children will probably always want their mothers, but in a post scarcity world no one needs to worry about where their next meal is coming from.
There are people who are innately competitive. And there are people who don't care.
I'd argue that a lot of people are apparently competitive because of social pressures. You'll have to discount the effects of modern society on people's minds before you could make a claim on what human nature actually is like.
However I would note many, many people are not motivated by status. I for one would rather be unknown and my relative status compared to anyone else is about the last thing I will ever concern myself with. I’m not alone, even if the status seekers stand out for all their attention seeking.
Anything stated by the government about the economy has an effect on said economy, so it makes sense to massage the metrics. But what makes the government's chosen cutoff truer than another one?
For example, it's been demonstrated that workers on disability is inversely correlated with unemployment: https://apps.npr.org/unfit-for-work/
West Virginia, Mississippi, and Kentucky all have almost 20% of their adult populations on disability:
https://www.statista.com/statistics/794278/disabled-populati...
Meanwhile, on kentucky.gov:
> Today, Gov. Andy Beshear announced that Kentucky set the lowest annual unemployment rate in state history for 2022 at 3.9%
https://www.kentucky.gov/Pages/Activity-stream.aspx?n=Govern...
Would you say that the Kentucky government patting itself on the back for unemployment rates of 3.9%, while in fact real unemployment is at minimum 21.6%, is something other than the government lying about what unemployment actually is?
The rules are complex, but for every $1 you earn you lose roughly $0.50 in benefits, until they quickly reach $0 for even a modest job.
> Fewer than 1 percent of those who were on the federal program for disabled workers at the beginning of 2011 have returned to the workforce since
The actual government is reporting the real rates of unemployment. Partisans are the issue.
No true Scotsman indeed!
One of those agendas is publishing numerous economic data.
The individuals in service of the government and the media outlets that they talk to are where the proverbial cherry-picking takes place.
Partisan politicians and partisan media, not some incoherent notion of “the government.”
So?
If you're happy that the feds are "publishing all of this data and being transparent about it", then you should be happy for what the TFA does too (even if you disagree with their conclusion): they use this published data in a way that they think is more insightful.
Should the feds conclusions and choice of criteria be unchallenged just because they publish their data?
>Nothing about having some arbitrary cap at salaries below 25,000 make this a “truer” metric.
The Bureau of Labor Statistics also has all manner of "arbitrary cutoff points".
The number they use is not meant to be magical constant of the universe, it's just supposed to be a more insightful cutoff to understand the real impact of unemployment.
Besides, the main job of government agencies is to make the government and their managers look good.
Conclusion: the low official Unemployment rates are not a reflection of a healthy economy, they are a reflection of decreasing minimum wages.
https://en.wikipedia.org/wiki/Keynes%27s_theory_of_wages_and...
source: https://www.atlantafed.org/chcs/wage-growth-tracker#Tab3
What we really care about are the people who are persistently in poverty and whether or not that number grows or shrinks. If it shrinks the economy is helping real people, if it's not, it's helping the well off.
Or do you argue that people are bouncing between jobs with lower wage growth and higher wage growth, so the bottom 25% of wages are getting worse and worse, yet they are only temporary?
It seems pretty clear that 25% of earners experience no growth or negative growth YoY while 25% of earners see wage growth that outpaces inflation. Unless they are swapping places constantly, it's not really healthy for this to occur over a long period of time (as it has).
They provide this definition: Wage Growth Tracker is a measure of the nominal wage growth of individuals. It is constructed using microdata from the Current Population Survey (CPS), and is the median percent change in the hourly wage of individuals observed 12 months apart.
Chart 1 plots the time series of the median, along with the mean, and the 75th and 25th percentiles of the individual wage growth distribution
I believe this chart will almost always show little or negative numbers for the bottom 25% of wage growth. By definition.
Still trying to make time to play with the data myself but I suspect it won’t really contain the information I want.
Again... you want to look at the number of people in poverty. That's the true metric of an economy, not the unemployment number.
I can have 3x the income of monthly food budget (poverty threshold). What happens when housing per month is also 3x the cost of food per month?
Poverty threshold is a poor indicator of the economic health. Poverty can lower while the ability for the average citizen to support a family continues to drop.
> Are you arguing there's not increasing mobility, with this new fangled internet and the series of tubes and what have you?
That's not an argument. Technological improvements can result in consolidation of capital and rising inequality. Something like that would be indicated by... top 25% of wage earners outpacing inflation while bottom 25% continue to stagnate or fall behind.
EDIT: The last poverty rate publication showed the supplemental poverty rate rising (taking into account more factors that traditional poverty rate). Previous to the pandemic, they were largely correlated. We will have to wait until the 2024 results to see if the inversion holds true.
source: https://www.census.gov/content/dam/Census/library/publicatio...
One way to think of an economy is GDP/stock market/etc. Another way to think of it is: "What is the maximum level of poverty before there's a revolution?" Moving people from the poverty class to the middle class should be a basic goal for any economy -- because it's likely to affect the most citizens.
> That's not an argument.
So if you're in small town Nebraska in 1910/20/30/40/50/60/70/80/90's, it was super hard to learn calculus (one example) unless you enrolled in college and traveled to the university/college, etc. Why? No one else knew it, nor could they teach it.
Back before 2000's era, people were held back, mostly based upon where they were born. In the internet era, you can be a millionaire/billionaire without having to travel to the shit hole that is silicon valley. Amazing!
Edit:
I saw your edit, and yes, you would expect poverty to go up in a down turn economy. But you would also expect it to go down if economic gains are truly affecting everyone, and not just the rich or upper middle class.
Again, you need to look the number of people in poverty. Is it growing or shrinking? That's the true metric of an economy.
When you get to 50% or more in poverty, that's revolution territory.
The biggest increases have been in the bottom 10% and the top 10%, union members and job hoppers.
https://www.statista.com/statistics/1351276/wage-growth-vs-i...
If you think deflation is better, ie money in the bank should be worth more over time, just look at what happened to Japan with their deflationary economy. Some call it the "Lost Decade".
The point I have is when looked from 20 years from now, it will be a blip. It's not the great depression, it's not the gas crisis of the 1970's. It's not even as bad as 2008.
Yes it sucks in the moment, but it won't in a few years when wages catch up finally.
They go back to college, they develop new skills, they do some training, etc, etc.
That's what makes economics hard is that we're dealing with 400M walking talking humans in the US.
https://en.wikipedia.org/wiki/Third_derivative#%3A%7E%3Atext...
Also, why include people with no jobs? That would include stay-at-home parents and even FIRE folks that retired early
https://assets-global.website-files.com/63ba0d84fe573c751359...
But the official numbers are undercounting the unemployed because they also changed the way they interpret the numbers.
The real unemployment rate using the old measurement methods is probably around 8% which isn't good, but it's not 23% which would be deep depression type numbers.
1/3 of the population "unemployed by modern standards" in 1995 doesn't sound unreasonable to me. Back then one stay-at-home-parent was a lot more normal.
"a lot more" is doing a bunch of heavy lifting there... I was about 30 back then, and 2 working parents was considered 'normal'. One working parent was considered 'the dream'...
edit: the fact "latch key kids" was basically coined for gen-x kids would seem indicate 2 working parents was common.
The fact that it was a specific term indicates it was a known thing, but at the same time not pervasive in the way it is now.
Its late and I'm going to bed, but a quick search did turn up a bit more concrete data [0], it appears by 1988, 40+% of families were 'dual worker families'. It appears to be about 65% currently[1]. I'm guessing that would put it around 50% of families in the mid/late 1990s, so about a 15% change in ~30 years. I'd say 50+ percent counts as 'pervasive' in both cases.
edit: I guess the point I was trying to make is that both parents having to work is a pretty old trend, with the majority of families needing dual incomes going back decades - and really doesn't seem to be getting any better.
0: https://www.bls.gov/opub/mlr/1990/03/art2full.pdf chart 1 page 16
1: https://www.bls.gov/news.release/pdf/famee.pdf page 2, "families with children"
I will leave this here: https://www.reddit.com/r/badeconomics/comments/jd3p0l/axios_...
to show why LISEP's measure of unemployment is problematic. I haven't had chance to look at the methodology for this particular piece but I suspect it's also got few holes/unmentioned bias in there (as so many of these think-tanks do).
BLS also has different measures of unemployment (see: https://www.bls.gov/news.release/empsit.t15.htm) and what LISEP is citing as "headline unemployment" is U3. Not all metrics are perfect and I think it's important to understand the methodology and the nuances of how to apply these different metrics.
I'd argue we should count those people. If someone has failed to find a job they want for a long time, they might give up. That reduces the numerator and denominator each by 1, reducing the calculated unemployment rate. Does that make any sense?
https://apps.npr.org/unfit-for-work/
18.7% of West Virginians are on disability, so aren't counted as unemployed. Meanwhile only 10.5% of New Jerseyans are. Are West Virginians really almost twice as likely to be physically disabled as their near-neighbors in NJ?
If they called the LISEP unemployment rate, I'd be happy :)