Getting a handle on ‘unemployment’

Underemployed workers are not merely individuals who are not earning as much as they would have liked to; rather, they are individuals who are unable to find employment in jobs that match their skills and availability, and as a result are forced to survive on reduced earnings.

Noga O'Connor
Noga O'Connor

One effective way to gauge the effect of the recession on the state’s economy is tracking the state’s unemployment rate. But how accurate is the unemployment rate? The official rate for 2009 was 6.3 percent — does this mean that 93.7 percent of the labor force in Iowa was gainfully employed?

Not exactly.

The official rate only accounts for those actively searching for work. The Bureau of Labor Statistics offers annual averages for several broader measures. If we include, for example, those who want to work but stopped looking for work, the 2009 figure rises to 7.1 percent.

And what about underemployed workers, such as part-time employees who would have like to work full time, but whose hours were cut back or who are unable to find full-time jobs? If we add those who are involuntarily part-time, the 2009 unemployment rate rises to 11.7 percent.

To complicate things further, even the figure of 11.7 percent can be viewed as conservative. The Bureau of Labor Statistics has no measure of the number of Iowans that are working in jobs that are below their education, skill or experience levels — another form of underemployment.

These examples — involuntary part-time workers and workers who are employed below their skills — are of non-unemployment labor market behaviors that should not be overlooked when estimating the impact of the recession on the state’s economy.

Underemployed workers are not merely individuals who are not earning as much as they would have liked to; rather, they are individuals who are unable to find employment in jobs that match their skills and availability, and as a result are forced to survive on reduced earnings. In the case of over-educated workers, they are also not seeing the earning premiums that are needed to offset the financial investment in higher education.

Underemployed workers have a distinct effect on the labor market. Over-educated workers are taking jobs from those with less education, as there are still not enough jobs for everybody. As employers gravitate toward the more-educated workers, over-education at the top is accompanied by unemployment at the bottom.

Posted by Noga O’Connor, Research Associate

Author: iowapolicypoints

The Iowa Policy Project is a nonprofit, nonpartisan organization that provides research and analysis to engage Iowans in state policy decisions. We focus on tax and busget issues, the Iowa economy, and energy and environmental policy. By providing a foundation of fact-based, objective research and engaging the public in an informed discussion of policy alternatives, IPP advances effective, accountable and fair government.

1 thought on “Getting a handle on ‘unemployment’”

  1. My past association with SPSS (Statistical Package for the Social Sciences) invigorated that age old statement , “Figures don’t lie, but liars do figure.” That has not changed. Anything can be shown to be true if you keep looking for the things that will prove it, in spite of all kinds of evidence to the contrary. Unemployment figures are a key indicator of usually the opposite of what they are attempting to show. Naturally if you aren’t counting everyone, and including them, you can’t possibly come up with any figures because there are so many variables to control for. Hunger in America is on that same sort of crazy set of statistics, just how hungry do you have to be to qualify as “hungry”. If,you are eating dirt and you are still starving certainly you had something to eat, but are you hungry or are you beyond hungry? Spiting out stats is often a way to confuse issues and avoid doing anything at all, usually the direct approach fails miserably. If one looked at poverty and where that is income wise, then looked at minimum wages and what that gives a person as a start up wage. Likely we could lose quite a number of the employed to those considered under employed. In some cases of families, even unemployment isn’t enough to sustain them, with or without an extension. All this Workforce Data says primarily is there are people being paid well at the job they have to create these illusions so at least there are a few people not under the bus and in company with a whole lots of people who aren’t counted.

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