[A-List] Unemployment Redefined

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Article from
Jing Zhao
US-Japan-China Comparative Policy Research Institute,
San Jose, USA
http://cpri.tripod.com

cpri_zhao@xxxxxxxxx

Unemployment Redefined

According to U.S. Department of Labor’s Bureau of
Labor Statistics [1]: “The unemployment rate was 6.1
percent in May; the number of unemployed persons was
9.0 million.”   “The employment-population ratio edged
down to 62.3 percent in May; total employment, at
137.5 million, …”  “Over the month, the civilian labor
force and labor force participation rate were
unchanged at 146.5 million and 66.4 percent,
respectively.”  “In May, 1.4 million persons were
marginally attached to the labor force, about the same
as a year earlier. These individuals wanted and were
available to work and had looked for a job sometime in
the prior 12 months. They were not counted as
unemployed, however, because they did not actively
search for work in the 4 weeks preceding the survey.
There were 482,000 discouraged workers in May,
essentially unchanged from May 2002. Discouraged
workers, a subset of the marginally attached, were not
currently looking for work specifically because they
believed no jobs were available for them.”

By definition, “the unemployment rate includes only
people within the labor force who are out of work”
(Lawrence Summers, former U.S. Secretary of Treasury)
only for a short period covered by unemployment
insurance (usually 6 months). The above official
statistics explains why many unemployed people (not in
labor force, NILF) were not counted as unemployed.
Under this definition of unemployment, “trained
economists” all over the world seriously study such
“academic” policies as “Is unemployment a problem?”
“The natural rate of unemployment”.

How degenerated Economics has become! What is the
usefulness of Economics?  If the unemployment is not
easy to measure, the employment data are relatively
complete and accurate.

[Definition]
U = 100% - E = 100%- EP = 100% - LFP x (100%-Ug)
where U is unemployment rate, E is employment rate, EP
is employment-population ratio, LFP is labor force
participation rate, and Ug is the governmental
unemployment rate [2].

Simple, easy and accurate. No more ambiguous
definition or explanation.  According to the above
governmental statistics, the U.S. 2003 May employment
is 100%-62.3%=37.7%, and the unemployed population are
8,998,000+74,283,000=83, 281,000, versus 137,500,000
employed labor force.

If American economic policies are based on this 37.7%
unemployment rate fact, will there be an economic
revolution?

Now let see the second largest world economy.  The
Japanese government does not use “unemployment”.
Instead, it uses “complete unemployment rate,” which
is “completely unemployed population-labor force
population ratio”.  The “completely unemployed
population” is defined as: “during the survey week,
among these who did not work at all but they could
work, wanted work and actually sought work, and who
could work immediately but was waiting for job-seeking
result” [3]. This is a confusing definition.
Following further the Japanese governmental
definition, we know that: 1) like the U.S. statistics,
many unemployed (NILF) are not counted as unemployed,
2) the opposite of “completely unemployed,” i.e., the
“employed,” includes those who worked longer than one
hour with income in a week, and those who “although
did not work but…”

By the above “one hour pay in a week means you are
employed” employment definition, the Japanese 2003
April “complete unemployment” is 5.4% [4].

Let’s help the Japanese governmental official
economists. From the same Statistics Bureau data,
Japan’s “employed labor force” (who has more than one
hour’s pay in one week) is 63.06 million.  The 15-64
age population (the actual labor force) estimation on
May 1, 2003 is 85.33 million [5]. So Japan’s “complete
unemployment” should be 100%-63.06/85.33x(100%-5.4%) =
30.1%.  This rate is lower than America’s 37.7%
because it is “complete” unemployment. If we use the
American standard to measure Japan’s employed labor
force, the Japanese unemployment will be higher than
37.7%.

As another comparison, the third largest world
economy, China’s “registered urban unemployment” is
3.6% and “labor force participation rate” is 77.03%
[6]. We cannot therefore conclude that China’s
unemployment is 100%-77.03%x(100%-3.6%)=25.7%, because
among the “participated” 730.25 million labor force,
67.2% are in countryside, which are heavily
under-employed.  China’s urban huko (residency
registration system) does not include the explosive
migration from countryside.  There are 14.59 million
people in absolute poverty, with an annual income
below 500 yuan; There are 90.33 million in poverty,
with an annual income below 1,000 yuan; Those with an
income between 1,000 and 2,000 yuan are 310.79 million
[7]. They amount to about half of the agricultural
population. Under-employment should be studied as
unemployment but it is not this essay’s subject.

Stocks and productivities may rise up, largely under
policy manipulations. However, employment cannot be
manipulated, and it will not rise under current world
economical system. Rather, the undergoing
Globalization raises unemployment everywhere around
the world, with or without economic growth.  This is
an era of globalization of unemployment.


Notes:

[1] The Employment Situation: May 2003, Unemployment
(Household Survey Data),
http://www.bls.gov/news.release/empsit.nr0.htm.

[2] The US Bureau of Labor Statistics undertakes a
monthly survey of about 60,000 households, to generate
the unemployment rate and voluminous ancillary data.
It is almost impossible to know to what degree these
60,000 households represent the total American
population. To not make this issue more complicated,
we assume the unemployment rate is accurate enough to
use.

[3] http://www.mhlw.go.jp/toukei/kaisetu/index-l.html.

[4]
http://www.stat.go.jp/data/roudou/sokuhou/tsuki/index.htm.

[5]
http://www.stat.go.jp/data/jinsui/tsuki/index.htm#05k2-1.

[6] The Chinese State Council (Government), Chinese
Labor and Social Security Situations, 2002 April,
http://www.china.org.cn/ch-book/429/2.htm.

[7] Cited Wang Xuchao, President of the China Poverty
Alleviation Fund in Ming Pao, Hong Kong, 23 March
2003.  Recited from Zhang Kai, “China struggling with
acute issues today,” _October Review_
(http://www.octreview.org) June 2003.

Jing Zhao
US-Japan-China Comparative Policy Research Institute,
San Jose, USA
http://cpri.tripod.com