Employment Rate

Labor, The Economy

Wikipedia lists some problems with the current method of calculating the unemployment rate in the US. These include the fact that 1.5% of the available working population is incarcerated, the large number of people who have dropped out of the work force, involuntary part-time workers” who would like full-time work, etc. It is also worth mentioning that those employed by the military were removed from the list of the unemployed in 1983.

A better way might be to calculate the employment rate”. Jerome a Paris offers us a distinction between the unemployment rate” and the employment rate”:

A big problem with the unemployment rate is that it is hard to define who is an active” member of the workforce. The employment rate, on the other hand, dispenses with the need to do so. As economists John Schmitt and Dean Baker point out in their report Old Europe Goes to Work: Rising Employment Rates in the European Union,” the employment rate provides a better measure of an economy’s success in incorporating women into the paid workforce.” I assume that this is because many women are often not considered to be actively looking for work. The standard myth is that women opt-out” to take care of families, but a recent report argued that women are actually pushed out:

Most mothers do not opt out,” says Joan Williams, director of the Center for WorkLife Law at the University of California, Hastings. They are pushed out by workplace inflexibility, the lack of supports, and a workplace bias against mothers.” In one recent survey, 86 percent of women cited obstacles such as inflexible jobs as a key reason behind their decision to leave.

As the Schmitt-Baker report shows, using these numbers also changes how one sees the oft-reported high unemployment rates in Europe. Jerome a Paris provides us with an interesting quote from Laurent Guerby which points out that the employment rate for working-age men in France is actually higher than that in the US, even though the unemployment rate for that group is nearly double.

In the fourth quarter of 2004, the normalised unemployment rate for men aged 25 to 54 was, according to the OECD, 4.6% in the USA and 7.4% en France. At the same time, for the same group, the employment ratio was 86.3% in the USA and 86.7% in France.

We thus have an unemployment number which is 60% higher in France than in the USA even though [in France] more people [should be a greater percentage of people”] work in the selected group, which is rather counter-intuitive if we expect the unemployment rate to reflect the situation of the labor market.

One should thus avoid hasty interpretations of unemployment numbers. In fact, the definition of unemployment is built on the — fragile — distinction between the unemployment of an potentially active worker his/her non-employment. Despite the best efforts to normalise this distinction, it remains heavily subjective and thus easily influenceable by various policies which have otherwise no real effect on the labor market. [Emphasis and some corrections added.]

This isn’t to say that unemployment isn’t a big problem in France (I think last year’s protests and riots showed us that it is), but simply that the numbers we see most often might not be the best way to evaluate the problem. Also, all of this is important because unemployment rates are used as a stick with which impose neoliberal reforms upon various European countries. The Economist and the Wall Street Journal love to trot out these numbers, although thanks to the blogsphere they are increasingly likely to be called out on this (see here and here).

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