The Fake Unemployment Rate
A story in the New York Times a week ago about older male workers who can't find work is a testament to hidden unemployment in the present economy, as older, often male workers drop out of the labor market and onto the disability rolls.
While the official unemployment rate is 4.6%, that excludes anyone not looking for work, including all these folks on disability and the 2 million plus folks in jails and prisons.
De facto, in a decade when some analysts celebrate younger women with kids being driven from welfare into usually low-wage employment, the other side of the story are those in prison and older men leaving the workforce due to deindustrialization or other layoffs and landing on SSI and other government disability payments.
The bottom line is that the unemployment rate is an occasionally useful statistic for some purposes, but is designed to ignore many of the social institutions that take many people out of the labor market, both voluntarily and involuntarily.
I would add my two cents thusly - on Wall Street, no-one looks very seriously at the unemployment rate. Job creation is key.
When "non-farm payrolls" are falling short of forecasts, the dollar gets battered. Right now, we're closing in again on $2 to the UK Pound. Around 1.30 to the Euro. There's no clearer indication that Wall Street reckons the Bush economy sucks. And it has everything to do with lousy job creation. The big currency punters know a one-way bet when they see it.
August 8, 2006 11:19 AM | Reply | Permalink
The actual rate may be lower than it should be, but the ups and downs over time are probably about right. After all, it's no easier to get on SSI now than it was 10 years ago. Also, international comparisons it's not clear that this is a cocnern either since many other countries also "hide" their unemployed in disability programs which, in some countries, are even easier to get on than in the US.
August 8, 2006 6:11 PM | Reply | Permalink
Lots of statistics have issues. For example, how do double digit increases in housing prices translate into single digit inflation? Mainly by deferring the price increases until rent contracts are updated.
August 9, 2006 6:18 AM | Reply | Permalink
No- the numbers show a quite massive uptick in SSI disability payments compared to the early 1990s. There are arguments that precisely to deal with older workers with few job prospects, the qualifications for SSI were loosened, but in any case, the need for SSI payments seems to have expanded, as have the numbers on the program. So unemployment in the past DID NOT have to account for this particular group, just as two decades ago, the vastly smaller number of people in prisons did not have the same distorting effect on the unemployment numbers.
August 9, 2006 7:37 AM | Reply | Permalink
"Vastly" smaller numbers of people in prison? Maybe if we are talking about 60 years ago. But for sure all through my life America has led the developed world in imprisoning its citizens.
Also, I have to say I am VERY skeptical about the SSI claim here. To be sure, as the populatoion ages one would expect a natural increase in people on disability no matter what. However I know a couple of people who tried to go on disability (for good reasons; they were not cheating the system) and they had to jump through incredibly complex hoops. One (with a fairly advanced case of AIDS) was finally given disability*; the other, with major back problems, has been turned down repeatedly for the past five years (she is still working, quite miserably I might add). So no, you don't just stroll down to the Social Security office, announce you don't feel well, and get a check handed to you. It can take months, years even, and I have to remain dubious that it has gotten any easier-- heck, with a GOP president in office it seems more likely it has gotten harder.
In any event I do think my other claim (that many nations are "hiding" their unemployed in disability programs) still stands.
* My friend with AIDS did have a fairly easy time getting his private workplace longterm disability policy to kick in; it took a lot for him to get on the public program complete with Medicare coverage.
August 9, 2006 5:24 PM | Reply | Permalink