Home > Uncategorized > Let’s take (un)employment statistics more serious

Let’s take (un)employment statistics more serious

1bOn his insightful ‘conversable economist’ blog the excellent Timothy Taylor has a good piece about European unemployment which as follows:

American readers: can you imagine the social turmoil in the US if the unemployment rate has been above 10% for the last seven years, instead of peaking at 10% back in October 2009 and falling down to about 5% by a year ago in fall 2015? Can you imagine if half of these unemployed had been looking for work for more than a year? Consider the difference, and you’ll have a better sense of why the EU is struggling to have much appeal to the European public.

And this is without regard for Balkan countries like Albania which are not (yet) a member of the EU and which have rates which sometimes are as high as 30%. Taylor is totally right to imply that, despite the decline of the last two years, Euro Area unemployment is, with 10%, still extremely high while long-term and Southern European unemployment are not a reason for concern but a reason for alarm.

I do have something to add, however. As should be known, participation rates (people who has or want a job, as a % of te population) have declined in the USA, unlike the situation in the EU were rising participation rates of people over 55, Southern European women and in fact all East Europeans caused the participation rate to increase which means that differences in the development of employment were less large than differences in the development of unemployment (graph 1, OECD data). The USA also shows a marked long-term decline of the employment rate. Does, against that background, the election of somebody like Trump really come as a surprise? The decline was taken serious – but not serious enough.

There are however quite some differences between European countries. Graph 2 (Eurostat data) does not show data on employment but on participation and shows the change in participation rates in EU countries as well as Iceland and Turkey after 2008. Iceland (non-EU) is included because it has the highest participation rate of the entire sample – and still shows a considerable increase. Turkey is included because it knows a fast increase of the labor force – which does not exclude a rise in the participation rate (mainly: women) in combination with a stable (though high) rate of unemployment.

2a

As one can see most countries knew rising participation rates, despite the Great Financial Crisis and (after 2010) despite pro-cyclical fiscal and, for a time, monetary policies. Most, but not all. Especially countries which were and are lauded for their flexible labor markets actually saw declines. Just like the USA. Remarkable are the considerable increases in the transition countries. Getting unemployment down in combination with giving chances to these (net) new entrants on the labor market does not require insecurity, creditor oriented policies, clueless governments and austerity but jobs and households which do not save for their pensions but which date to invest in their future. Let’s give Europe, and not the authoritarians, a  chance. Starting with taking the unemployment statistics more serious.

  1. Tom Welsh
    November 30, 2016 at 9:42 am

    See http://www.shadowstats.com/ for the real US unemployment rate, which from memory is about 20%.

    • merijntknibbe
      November 30, 2016 at 10:02 am

      Dear Tom,

      I prefer the actual *measurements* of ‘broad’ unemployment from the BLS above the sometimes somewhat sahdy conjectures of shadowstats. Broad unemployment varies between 6% for Nebraska to 13% for Alaska (which is still way lower than ‘normal’ unemployment in Greece, Spain, Macedonia etcetera etcetera…). http://www.bls.gov/lau/stalt.htm All measurements have flaws but they do impose empirical discipline upon our thinking. And the flaws of these measurements are, imo, quite limited.

  2. December 1, 2016 at 9:48 am

    My two youngest sons are both millennials. Neither works full-time or are likely ever to. Most of my sons’ friends either operate small businesses or work in small businesses. And all spend more time in what is generally classed as “hobbies” than at a business or job. In other words, the millennials are changing most of the details and rules about work and pay for work. Most volunteer a lot, engage in community projects, and give much of their “salaries” to charities. Most do not own cars or homes, and most show little interest in becoming wealthier (in the now current meaning of that word). This leads me to wonder how the significance of the views presented here will change over the next 20 years as millennials begin to be the dominant generation. In particular I wonder how the terms work, (un)employment, salary, success, justice, etc. will change. I don’t know that such countries as Russia and China will not try to suppress such changes. And perhaps also the US. But as my Marine Corp. drill instructor said, none of us lives forever. So even those who oppose these changes by millennials will be powerless to stop them from the grave. My conclusion: we’re in for some radical changes to work, employment, wealth, etc. over the next 30 years. Hope economists can keep up because I think many of the changes will knock down the house of cards mainstream economists have help construct since the 1970s. For economists it’s a case of adapt or die. How many will adapt, I wonder? How many will die?

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