What unemployment is (and what it isn't)

Unemployment refers to not being employed. Every month, the Department of Labor surveys 60,000 random households to collect data on employment. They measure whether people are participating in the labor force and are employed. When the news reports on the unemployment rate, it's important to understand what it really is.

According to the DOL, being unemployed means that you do not hold a job but have looked for one in the last 4 weeks. Thus, it does not include people who have given up looking for work or are retired. This can underscore the unemployment rate as the people who need the most help aren't included in the survey. It also doesn't measure people with part time jobs who aren't making much money (underemployment) nor does it look at whether people are being paid.

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The DOL also measures labor force participation. This rate measures everyone 16+, not serving active duty, and not commited to a mental ward or prison. The labor force participation rate measures people who hold a job or have looked for one in the last 4 weeks. Of those not participating, 44% are retired, 19% are disabled, 18% are going to school, 15% have home responsibilities, and 5% listed other.

On the other hand, unemployment can also overscore the issue. Currently, the unemployment rate is at 3.8% but only 21% of them have been out of work for 27 weeks or more (DOL also measures how long someone was unemployed). What that tells you right off the bat is that most people who are "unemployed" find a job pretty quickly. This implies that most unemployed Americans are in the process of switching jobs or are entering the workforce. Thus, there is a natural rate of unemployment. Unfortunately, this may underscore people who keep finding a job but can't hold down one for long.

Don't get me wrong, the unemployment rate is still a good indecator of how well an economy is doing. If the unemployment rate doubles, that's a good indecator that the country is in a recession and if it's below 3% pretty much everyone can find a job. But it's not the be all end all indicator of whether someone can reasonably expect to hold down a stable job.

Yeah, the unemployment numbers are certainly useful metrics and do show some level of economic success, but they definitely don't paint a full picture. Trump even seemed to understand it BEFORE HE WAS PRESIDENT.

Everyone shouldn't need to be employed.
1/10th of the people easily make enough money for everybody.

ReMarx said:

Everyone shouldn't need to be employed.
1/10th of the people easily make enough money for everybody.

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Hmm... should 90% just kick back and have those 10% support them via income redistribution programs?

ttwtt78640 said:

Hmm... should 90% just kick back and have those 10% support them via income redistribution programs?

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Yep, unless those 10% want to reenact Place de la Concorde, 1793.

Besides, most people who received that income would invest it locally, giving cause for people to work to increase their lot in life. You inject 200,000 dollars a month into a town of 200 people and you just created a 2.4 million dollar yearly local consumer economy. Some of that would go to big corporations, but people would also buy from local businesses which would employ and be run by local people. They wouldn't just sit around on their ass and do nothing, because a huge amount of new opportunities would open up in front of them.

$1000 said:

Yep, unless those 10% want to reenact Place de la Concorde, 1793.

Besides, most people who received that income would invest it locally, giving cause for people to work to increase their lot in life. You inject 200,000 dollars a month into a town of 200 people and you just created a 2.4 million dollar yearly local consumer economy. Some of that would go to big corporations, but people would also buy from local businesses which would employ and be run by local people. They wouldn't just sit around on their ass and do nothing, because a huge amount of new opportunities would open up in front of them.

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That plan may well sound good to 180 of that town's folks, but is also likely to cause the 20 asked to pay $2.4M annually in additional taxes to alter their behavior (perhaps by moving to a different town?). Perhaps that is why these wondrous income redistribution (BIG?) schemes do not exist at the state/local government level.

ReMarx said:

Everyone shouldn't need to be employed.
1/10th of the people easily make enough money for everybody.

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Lets see. Household at 90th percentile makes about $145K. How much of that would you think is appropriate to take?

ttwtt78640 said:

That plan may well sound good to 180 of that town's folks, but is also likely to cause the 20 asked to pay $2.4M annually in additional taxes to alter their behavior (perhaps by moving to a different town?). Perhaps that is why these wondrous income redistribution (BIG?) schemes do not exist at the state/local government level.

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No, UBI would be taking the money off of a VAT on large heavily automated corporations like Amazon, which pay zero in federal taxes while simultaneously killing large amounts of local businesses. Very few towns have a members of the 10% living in them.

$1000 said:

No, UBI would be taking the money off of a VAT on large heavily automated corporations like Amazon, which pay zero in federal taxes while simultaneously killing large amounts of local businesses. Very few towns have a members of the 10% living in them.

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Every town has a top 10% - the problem is that they may leave town if they were "asked" to pay too much in additional taxes.

We have a corporate income tax now, yet congress critters do not use those funds to implement a UBI. Of course, to pay everyone (321M people?) $1K/month each would require raising the corporarte income tax to about 10X what it now is. A VAT tax, like any tax on a business, would simply be passed on to consumers in the form of higher prices for goods/services.

ttwtt78640 said:

Every town has a top 10% - the problem is that they may leave town if they were "asked" to pay too much in additional taxes.

We have a corporate income tax now, yet congress critters do not use those funds to implement a UBI. Of course, to pay everyone (321M people?) $1K/month each would require raising the corporarte income tax to about 10X what it now is. A VAT tax, like any tax on a business, would simply be passed on to consumers in the form of higher prices for goods/services.

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It's actually really hard to pass a VAT on to consumers because it's pre-retail. Usually, sales taxes are passed on because you don't have to pay sales tax if you don't sell an item, so you can recoup losses by selling less units at a higher price. With VAT, the tax is added at every stage of production, so it both punishes long supply chains (which incentivises efficiency) and also forces you to take a loss if you don't sell product. Businesses are not going to trash or waste capital which they've already invested in out of spite, and if they do the expanded local consumer economy will just claw back whatever market share they abandoned.

Even at half the VAT that Europe has we could implement a $1,000 a month UBI so long as it is co-exclusive with traditional welfare and entitlement programs.

$1000 said:

It's actually really hard to pass a VAT on to consumers because it's pre-retail. Usually, sales taxes are passed on because you don't have to pay sales tax if you don't sell an item, so you can recoup losses by selling less units at a higher price. With VAT, the tax is added at every stage of production, so it both punishes long supply chains (which incentivises efficiency) and also forces you to take a loss if you don't sell product. Businesses are not going to trash or waste capital which they've already invested in out of spite, and if they do the expanded local consumer economy will just claw back whatever market share they abandoned.

Even at half the VAT that Europe has we could implement a $1,000 a month UBI so long as it is co-exclusive with traditional welfare and entitlement programs.

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A UBI of $1K/month ($12K/year) for 320M folks would cost $3.85T/year - that is more than total current federal revenue (and why we have an annual budget deficit). Why anyone would need "welfare" if every household of three people gets an additional $36K/year in UBI is questionable. Amazon has a very short supply chain (many items are shipped directly from their manufacturer) thus they would pay less VAT than a typical local retailer would.

Per Capita Federal Spending Continues to Grow | Mercatus Center

Masterhawk said:

Unemployment refers to not being employed.

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Not really. Unemployed has the specific meaning of not working, being able to work, and actively trying to find a job. And you haven’t defined employed.

Every month, the Department of Labor surveys 60,000 random households to collect data on employment.

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Nope. Every month the Census Bureau interviews approximately 60,000 households selected from a representative sample survey. Each household is in the survey for 4 months, out for 8, back in four, on a staggered basis so that from one month to the next, 3/4 of the sample is the same, and 1/2 the sample is the same as the same month in the previous year. The data are sent directly to the Bureau of Labor Statistics. No one at main DOL, not even the Secretary of Labor, has any access to the data until publication.

They measure whether people are participating in the labor force and are employed. When the news reports on the unemployment rate, it's important to understand what it really is.

According to the DOL, being unemployed means that you do not hold a job but have looked for one in the last 4 weeks.

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Again, BLS and Censusvset the definitions, not DOL. but also, there is a difference between having a job and being employed. You might not have a job, but if you worked at least an hour for pay, you are considered employed for that week.
All questions are based on a single reference week.
The population surveyed are those 15 and older, not in the military, not in jail, or a nursing home, or any other long term care facility. The data on 15 year okds is not published.

Employed: if you own a business or farm, or worked at least one hour for pay or at least 15 hours unpaid in a family business/farm, you are employed. If you have a job and did not work because of vacation, illness, weather, or strike, you are still classified as employed.

If you did not, but could have started a job during the reference week and actively looked for work in the four weeks ending with the reference week, you are unemployed.

The employed plus the unemployed are the Kabor Force: those available to work.

Everyone else is Not in the Labor Force.

Thus, it does not include people who have given up looking for work or are retired.

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Because they’re not available to be hired.

This can underscore the unemployment rate as the people who need the most help aren't included in the survey.

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Underscore means to emphasize. Everyone in the population is included in the survey.

It also doesn't measure people with part time jobs who aren't making much money (underemployment) nor does it look at whether people are being paid.

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Part time jobs, voluntary and involuntary, are measured, and being paid is part of the definition of employed. But how could you possibly measure objectively if someone is getting paid enough?

ttwtt78640 said:

A UBI of $1K/month ($12K/year) for 320M folks would cost $3.85T/year - that is more than total current federal revenue (and why we have an annual budget deficit). Why anyone would need "welfare" if every household of three people gets an additional $36K/year in UBI is questionable. Amazon has a very short supply chain (many items are shipped directly from their manufacturer) thus they would pay less VAT than a typical local retailer would.

Per Capita Federal Spending Continues to Grow | Mercatus Center

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First, only people over 18 who are citizens. Then subtract people on social security. Then subtract people on welfare, disability, or food stamps, who would have to chose one or another. That brings the price to well under 2 trillion.

218 million
- 38.5 million people (SS)
- 46.5 million people (SNAP/Food Stamps)

133 million people on UBI
So that's about 1.6 trillion a year for 12,000 for each individual at the most.

The actual products have a short supply chain, but the robots used in the warehouses do not, so a VAT hits complex automated industries harder than, say, a grocer who sells locally farmed produce or even a local seasonal produce stall, which are all things which currently unemployed people could do in their spare time to make a quick buck.

$1000 said:

First, only people over 18 who are citizens. Then subtract people on social security. Then subtract people on welfare, disability, or food stamps, who would have to chose one or another. That brings the price to well under 2 trillion.

218 million
- 38.5 million people (SS)
- 46.5 million people (SNAP/Food Stamps)

133 million people on UBI
So that's about 1.6 trillion a year for 12,000 for each individual at the most.

The actual products have a short supply chain, but the robots used in the warehouses do not, so a VAT hits complex automated industries harder than, say, a grocer who sells locally farmed produce or even a local seasonal produce stall, which are all things which currently unemployed people could do in their spare time to make a quick buck.

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It is amazing that your "universal" basic income has to become non-universal for it to become financially viable. Allowing those now getting other (federal?) public assistance to choose whether they want UBI instead only adds to its cost - obviously, folks getting more (federal?) public benefits would opt out of UBI to keep doing so. For example, my SS is more than $1K/month while my girlfriend's SS is less than $1K/month so I would opt out of UBI and she would opt in.

Why those making above the median income would (should?) get any federal "universal" income supplement is certainly questionable. Your "logic" which implies that someone getting $14K/year in SS retirement (or other public assistance) would not get a UBI bonus yet someone making $56K/year (4X as much) working would is simply moronic.

ttwtt78640 said:

It is amazing that your "universal" basic income has to become non-universal for it to become financially viable. Allowing those now getting other (federal?) public assistance to choose whether they want UBI instead only adds to its cost - obviously, folks getting more (federal?) public benefits would opt out of UBI to keep doing so. For example, my SS is more than $1K/month while my girlfriend's SS is less than $1K/month so I would opt out of UBI and she would opt in.

Why those making above the median income would (should?) get any federal "universal" income supplement is certainly questionable. Your "logic" which implies that someone getting $14K/year in SS retirement (or other public assistance) would not get a UBI bonus yet someone making $56K/year (4X as much) working would is simply moronic.

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It's to make it universal, to remove the disincentives which means tested welfare apply to those trying to escape poverty. It also reduces the stigma associated with receiving assistance and jumpstarts local economies. Someone on social security doesn't get it because they aren't working, likely have savings, and don't need it. All of their descendants do, though, which makes it much easier to care for them, to hire a live-in nurse for example, instead of relying on our disgusting nursing home system which is rife with abuse.

Part II

Masterhawk said:

The DOL also measures labor force participation. This rate measures everyone 16+, not serving active duty, and not commited to a mental ward or prison. The labor force participation rate measures people who hold a job or have looked for one in the last 4 weeks. Of those not participating, 44% are retired, 19% are disabled, 18% are going to school, 15% have home responsibilities, and 5% listed other.

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The labor force participation rate is the percent of the adult civilian non-institutional population that is either employed or unemployed (the labor force).

I have no idea where you got your figures from: BLS does not ask those questions.

On the other hand, unemployment can also overscore the issue.

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Over score means to make a mark over something. I’m not sure what you think it means.

Currently, the unemployment rate is at 3.8% but only 21% of them have been out of work for 27 weeks or more (DOL also measures how long someone was unemployed). What that tells you right off the bat is that most people who are "unemployed" find a job pretty quickly. This implies that most unemployed Americans are in the process of switching jobs or are entering the workforce. Thus, there is a natural rate of unemployment. Unfortunately, this may underscore people who keep finding a job but can't hold down one for long.

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BLS considers 15 weeks to be long term unemployed. I would certainly disagree with you that anything less than 6 months is “quick” to find a job.

Don't get me wrong, the unemployment rate is still a good indecator of how well an economy is doing. If the unemployment rate doubles, that's a good indecator that the country is in a recession and if it's below 3% pretty much everyone can find a job. But it's not the be all end all indicator of whether someone can reasonably expect to hold down a stable job.

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The unemployment rate measures the percent of the labor force that is unemployed. Meaning it measures how much available labor is not being used. That’s it. That’s all it’s meant to measure.

$1000 said:

It's to make it universal, to remove the disincentives which means tested welfare apply to those trying to escape poverty. It also reduces the stigma associated with receiving assistance and jumpstarts local economies. Someone on social security doesn't get it because they aren't working, likely have savings, and don't need it. All of their descendants do, though, which makes it much easier to care for them, to hire a live-in nurse for example, instead of relying on our disgusting nursing home system which is rife with abuse.

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Yet someone who simply turned 18 and is not working would get your UBI - that makes no sense to me.

ttwtt78640 said:

Yet someone who simply turned 18 and is not working would get your UBI - that makes no sense to me.

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The person on social security has had at least 40 years to build wealth, to pay off a mortgage, and their children are already raised and out of the house. The 18 year old has to buy a house, pay off the mortgage, doesn't have a car to trade in, needs to get married and raise children, and build up enough savings to retire one day, while also helping to take care of their older relatives and probably paying of tens of thousands in student loans. A society that doesn't invest in the next generation is committing suicide, and its clear to me that the 18 year old needs it. And it's not like $1,000 is enough to sit on your ass and live a comfortable life. The injection of this money into all communities will also likely make more fulfilling, enjoyable, and creative work productive. One of the things I think of is the young people who make mods for video games for free. They put a lot of work into it, sometimes improving the game waaaay beyond what the gaming studio ever envisioned, for free. With better security to take risks, these people could make video games for a living instead of modifying existing ones as a hobby. Same goes for painters, gardeners, people who are interested in farming. All of those are many times more fulfilling than cubicle work, which people often accept out of economic desperation. The UBI could be considered as a subsidy which allows people to pursue their true dream career even if they don't make enough.

$1000 said:

The person on social security has had at least 40 years to build wealth, to pay off a mortgage, and their children are already raised and out of the house. The 18 year old has to buy a house, pay off the mortgage, doesn't have a car to trade in, needs to get married and raise children, and build up enough savings to retire one day, while also helping to take care of their older relatives and probably paying of tens of thousands in student loans. A society that doesn't invest in the next generation is committing suicide, and its clear to me that the 18 year old needs it. And it's not like $1,000 is enough to sit on your ass and live a comfortable life. The injection of this money into all communities will also likely make more fulfilling, enjoyable, and creative work productive. One of the things I think of is the young people who make mods for video games for free. They put a lot of work into it, sometimes improving the game waaaay beyond what the gaming studio ever envisioned, for free. With better security to take risks, these people could make video games for a living instead of modifying existing ones as a hobby. Same goes for painters, gardeners, people who are interested in farming. All of those are many times more fulfilling than cubicle work, which people often accept out of economic desperation. The UBI could be considered as a subsidy which allows people to pursue their true dream career even if they don't make enough.

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In other words, you simply favor the young over the old - after all, who needs more than the average SS retirement benefit of $1,200/month.

ttwtt78640 said:

In other words, you simply favor the young over the old - after all, who needs more than the average SS retirement benefit of $1,200/month.

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Well, obviously not 'in other words', as I just gave a whole paragraph of good reasons why the country should be investing in the young over the old, primarily because the old people have had 40 years to save up money and have less expenses in their future. If you really want to get down to it, they were also living in a time of cheap housing, low college tuition, lower costs of living, hugely appreciating home values, and wages that weren't flat for decades. Not to mention that they didn't have to contend with automation chewing through the job market like a buzz saw during their working years. If they haven't managed to save up enough to live on when combined with social security, AND have alienated their families enough that no one would spend the money to help them after a huge cash infusion, that's their fault.

Masterhawk said:

Unemployment refers to not being employed. (...) According to the DOL, being unemployed means that you do not hold a job but have looked for one in the last 4 weeks.

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Actually, the definition of an unemployed worker is someone who (a) seeks work and (b) is not hired. It is mapped directly for the notion of excess supply in introductory microeconomics. What the DOL does is operationalize the concept by imposing a measurable definition of (a). It says you need to have looked for a position in the last month to count as someone who seeks work.

Of course, in a crisis, some people might want to work but give up looking. You only know they're looking if they chanced upon a job offer and take it. But you can't magically conjecture the capacity to account for it. Moreover, we know that there is ample turnover in job positions, especially in the US. Jobs are created, others are destroyed; firms lay off workers, and hire others; workers resign and accept new offers. But that is not what unemployment measures. It measures excess supply in the labor market. You can use average unemployment durations to pin down a probability of finding a job, if you insist, or use the ratio of unemployed people to the number of jobs offers to define what we call market tension. They're all interesting measures, but they show you something else.

If your point is that it's stupid to look at the latest unemployment figure to tell if the economy is in good or bad shape, you are correct in a certain sense. You also omit the fact that the latest value will be revised several months in a row too and that it will be especially poorly measured around turning points, so you're likely to figure out you're in a recession too late if you just look at that.