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?
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