The BLS puts out 6 different unemployment statistics for every period. U3 is the "official rate", but you can also look at the other ones, including U4 = U3 + "discouraged workers", U5 = U4 + "marginally attached" workers, U6 = U5 + part time workers who would like to be full time. You can make arguments about which measurement is "right", but putting out an editorial implying that there is sleight-of-hand going on is silly--all the measurements are available, and comparing a single one to itself over time as a "headline rate" is completely reasonable.
Ha, I came here to make the same comment. Anyone who writes about the misleading nature of U3 without describing U6 exists, is a BLS reported figure, and that there is no prefect definition of "unemployed" is a hack.
There is plenty of bad reporting out there (including "analysis" from political talking heads that don't know the difference between U3 and U6), but U3 is like the snow forcasts for NY last week. If you don't care to look beyond the surface level, don't be surprised when a wide-breadth news establishment only gives the basics.
If anyone reading wants to see U6, or just doesn't know about raw data on FRED, go look at it [1].
Anyone who deals in data professionally is sharply aware that any single figure measure is misleading on it's own. And if they live in the US they will more than likely be aware of the broad swath of government statistics that are made available ( for free ) to the public. As such it's quite easy to develop a contemptuous attitude towards lay people who aren't aware of things that are so foundational to people who work in the field.
That the "lie of the official unemployment statistics" keeps on getting rediscovered is a testament to the general lack of numeracy in the population at large; and to the construction of political reality by the media and the political class.
And in a political sense, the unemployment statistics are a lie; since we are supposed to be reassured that the situation is fine when in fact it's not. If the vast majority of people in their prime earning years ( 35-55 ) are drastically un- or under- employed what does that mean a decade out? Are we going to have millions of 60 year olds who haven't held a straight job in a decade? What's going to happen to them? Are they all going to survive by panhandling in the parking lot at Walmart? What?
To be fair, it's not as though the government treats the wealth of data as equally important and the media just fixates on one measure. The government wants to tout that low unemployment rate as well, and they make sure to do so whenever it fits their purposes.
Still a far cry from saying they're lying to us, but they're not exactly innocent victims either.
Well, I think it's more like saying we should prefer temperature data based on tree rings or ice cores (or, even, old mercury thermometers).
"Prefer" is probably the wrong word, so you certainly have a point. "Accept, with a note that the data isn't ideal" is much better. I'm OK with using less-than-ideal data when ideal data isn't available; but I'm disappointed with the number of reports that fail to mention any limitations of their. It's entirely acceptable to say "we don't have enough data to establish whether this claim is true."
Serious question - looking at the graph, it looks like the disparity between U3 and U6 jumped quite a bit in 2009 and is just starting to get back the historical difference today. Do you think it was valid to be concerned about the disparity increasing by so much in 2009? That part does strike me as a little worrying, though it is coming back in line now, which seems good.
Steep changes in the slope can introduce visual distortions when you compare the gap between two series. If you download and plot the difference, I think you'll see less of a change.
I find the periodicity very interesting. We're almost 5 years from the latest unemployment peak. Historically, it looks like we're likely to start trending back towards higher unemployment again, any year now.
Yes, it's like people think they've stumbled upon something novel by "exposing" the definition of the U3, which has been in place and largely unchanged for a long time.
It would be equally "misleading" to just say 11% of people are unemployed by using the U6. There's nuance to these numbers.
This article calls the official unemployment rate "misleading." That's moronic. It's explicitly detailed and if you prefer to use a different metric, do so. The value of the # is not the specific percentage itself, it's the trend. Follow any trend you like, they've all had a similar trajectory the last few years.
> Yes, it's like people think they've stumbled upon something novel by "exposing" the definition of the U3
For literally every President for the past 25 years, I've had someone breathlessly tell me "they just changed the way they calculate the unemployment rate so it doesn't look so bad!!!!!11"
Well, some of them were right. That has less to do with U3/U6 than it does the way data is gathered and the birth/death model they use. Actually trying to figure out how many people have full time jobs isn't a trivial task, and it's very much open to manipulation.
Exactly. Reporting the same number over time sounds very serious and correct, unless the nature of the market itself is what changed. In which case the reporting may totally miss the real event worth reporting. That said, the conversation here is rich in part because at least people are aware that the underlying market may have changed.
Reporting U3, or any other number, as "the unemployment rate" is intrinsically misleading if the underlying reality has changed. The system under discussion is not a physical system that we are discovering, it's an economic system that we are constantly manipulating. Frequently, the system is manipulated specifically to push one number or another in a politically desirable direction. This makes the reporting of any given number potentially "intrinsically misleading".
By contrast "People who want to mislead you" may try to use this number, but even their attempts are undermined by changes in the underlying dynamics.
> It would be equally "misleading" to just say 11% of people are unemployed by using the U6. There's nuance to these numbers.
How about those on SSDI? Are they included in any of the numbers? My neighbor used to work as a landscaper, but now collects SSDI while doing odd (cash) jobs here and there.
But if that U3 metric doesn't describe what normal people feel (the sort of people that don't know the difference between U3 and U6), then there is an argument for calling its "official" designation a sleight of hand.
The U6 metric counts underemployment as unemployment. This reflects the common sentiment in the media, and it obviously shows a lack of recovery where other metrics have fully recovered by now.
I would be very interested in knowing the history / politics / whatever of how U3 became the "official" measure, what that really means, and what the arguments are for and against its continued use.
For instance, most people (the vast majority, anecdotally) don't have any idea that there are multiple measures, and what the one they always hear about does and doesn't include. I've never heard the terms U3, etc. used on the television news or seen them on the front page of the NYT. Why is that? I doubt it's some conspiracy, but I'm genuinely curious how we got here, why we're still here, and whether we should instead be somewhere else.
I think of two other imperfect measures - the Dow Jones Industrial Average, and the relative temperatures (Windchill, Head Index).
The S&P 500 is a better index than the Dow. There are other indexes that are even more accurate. Yet the average layman 'gets' the Dow much better. Almost no one knows that the Dow is just a few dozen companies, and that the actual composition of the index changes all the time. Likewise, no one actually knows how windchill and heat index are calculated.
Yet, everyone can compare those things to past experience and 'get' what is going on. Holy crap, the Dow is up 400 points? Wow, it's going to feel like 105 tomorrow? Unemployment is 9%? Something is wrong.
If we suddenly switched to U6 as the 'official' measure, it would take a long time for people to adjust. Is 10% U6 good or bad? I have no idea without looking it up, even though I know what U6 is.
Right now it seems like the fed is working off of the higher unemployment numbers and semi-ignoring U3. I believe that is a good thing. But it is confusing to many.
U3 is the official measure because it matched the International Labour Organization definition[1]. Most countries use the same definition.
Measurement is always hard, and always requires caveats. There are good arguments both for including discouraged workers (hidden unemployment) and part-time workers who would prefer full time work (underemployment) in unemployment statistics. There are also good arguments against it, mainly around the fact that gathering those numbers tends to be more error-prone.
So I don't have any specific knowledge on this, but the intuitive answer is a combination of:
a) The Department of Labor puts out these measures in a boring, dry document. The news media then picks which measures to report on that will grab headlines.
b) Politicians and public officials latch onto the numbers that allow them to paint government and policies in the best (or worst) possible light.
Both of these lead to simplification of the source data. And if you are trying to paint it positively, you'd probably pick the narrowest, lowest unemployment number.
Not necessarily disagreeing with your intuition here, but that doesn't appear to be what happens - pretty much everybody reports on that same U3 measure. Certainly there are articles and discussions about other measures as well (for instance, the OP), but I never seem to see them in the "mainstream".
I'm not sure how or why that became the standard, but it's the standard per the International Labour Organization. The U6 rate only started being recorded in 1994.
U3 data goes back to 1890. There's always someone, usually in an opposing political camp, who says "it's misleading" when it goes down, or when it goes up. Both the left and the right have done this sort of handwaving over the years, but having a stable statistic that goes back many decades is useful even if you want to look at others for a more complete picture about what's going on. On some planet having U6 go from above 17% to just over 11% from 2009 to the present counts as "failed recovery" but I'm not quite sure how. You could argue that there's a bit of a gap there, like around 1.5% if you look at recent history, and maybe even argue that it's structural, i.e. that information technology is causing full-time work to go away, etc. but that's a technical argument to have, which would require looking at a lot of data and not just trying to score points by cherry-picking.
>On some planet having U6 go from above 17% to just over 11% from 2009 to the present counts as "failed recovery" but I'm not quite sure how.
Agreed. I argue this point all the time, actually. I think it's interesting to go back through and look at how unemployment fairs in comparison to the political party of the president during that time. Looking at the U3 rate for the past 50 years, unemployment has only gone down once under a republican president (Reagan) and Carter is the only democrat in the past 50 years who didn't see unemployment drop from the time he took office to the time that he left office.
Ah, this seems like the key answer to my question - it's the only one that's been tracked for generations, and we often want to compare across that time scale.
Since the U3 and U6 more or less follow the same trend., it makes sense to keep using the same reported measure for continuity. People know that 8% "umemployment" (aka U3) is bad. If you suddenly start reporting U6, people will think a 8% U6 is bad, when it is rather good.
If you want to use it to measure or model something else, you might have a reason to pick a different measurement.
Just because something has been hidden in plain sight doesn't mean it isn't being hidden. Many people dig no deeper than the news headlines and I do think this has been abused in different areas to mislead the public.
I have to agree with Lawtonfogle on this.
"Normal people" (which is a No True Scotsman fallacy, BTW) don't understand U3 unemployment because it's a wonky term with a precise (and possibly even counter-intuitive) definition and the people that "feel" something other than U3 are more than likely to not do basic research, the kind of people that don't bother to take personal responsibility and/or don't bother to find a way to train themselves for a better job (which likely makes them self-selecting for U6 unemployment).
Isn't it more likely that the U3 number is simply a more useful number for the class of people that wonk-talk about employment statistics and set policy? It's more targeted than U6 (which is a catchall for "people who are not currently employed or underemployed and might or might not be looking for work"). It's the same reason the wonks tack on "seasonally adjusted non-farmworkers" when talking about these figures -- those terms mean relevant things and fundamentally change the population of workers you are talking about.
Do the "normal" people concern themselves with the intricate details of Fed monetary policy, growth and yield details of equities, bond yeilds and their effects, foreign policy beyond the large military conflicts that the US is currently involved in? Nope. Why should they know the difference between "U3 unemployment" and "U6 unemployment" if they don't bother to learn?
I agree with higher-raked comments that the U3 unemployment numbers are useful if (1) you consistently use U3 in all reporting (don't jump from U3 to U6 to other metrics), you talk about trends and not the absolute number, and you describe which one you are using and what the caveats are of using that number.
For reference, the Wikipedia graph of U3 - U6:
https://upload.wikimedia.org/wikipedia/commons/9/9b/US_Unemp...
U3 and U6 track very well with each other. There are permanently structurally "unemployed"/"underemployed" people in the country. It doesn't seem to budge much, whereas the U3/U6 numbers do seem to change over time. This shows that U3 is a decent trend predictor of U6, suggesting that there is little difference between U3 and U6 when talking about trends.
Also note that U3 data goes back MUCH further in time, which is another suggestion that it is a long-standing convention and not "sleight of hand".
Exactly. It's an INDICATOR. It's not a terribly useful metric in and of itself, but it signals the state of many other metrics in one neat package. U1-U6 all pretty much move in lockstep with each other.
Their real gripe is in their belief that the average American is clueless about what goes into that ~5% unemployment stat.
BLS is transparent enough to make this criticism unwarranted, but the media/press covering unemployment statistics certainly aren't careful to define the stats they use.
Whether the 'sleight of hand' is intentional or not is another story (I'm inclined to say it's not, people just need a figure to benchmark to)
Clifton does not argue that the measurement is not available. I think he is arguing that U3 is not the most useful figure for Americans to hear the most about, from supposedly trustworthy sources.
> Here's something that many Americans -- including some of the smartest and most educated among us -- don't know: The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading.
U3 is not referred to as the "headline rate", it's called "official unemployment". While it's unfortunate that most Americans would not inform their voting--or other decisions--by researching the alternate measurements of unemployment, it is indeed the reality.
One would like to assume that when the president or a news organization cite an "official unemployment rate", they are offering us the best information about what might concern the average citizen. The number of people who have totally given up on finding a job is definitely one such piece of information. This, I think, is Clifton's main point.
Anecdotally, I've been pleasantly surprised at the amount of coverage alternate measurements get in the media. I've seen several segments that highlight this. It seems to me that the meaning of the "official" definition is becoming more commonly known. I think Clifton would disagree with me here.
Although, you might try explaining about U6 to a group of people who don't know about it. In several instances, I've been labeled a conspiracy theorist for doing so! Luckily, as you point out, the government does actually provide this information. I'm glad some are spreading the word!
The absolute value of unemployment isn't particularly important. It's never going to be 0%, so you end up having to establish some n where n% is "full employment". In the US that's around 5% for U3. We were around 5% before the financial crisis and are approaching it again now. That's a meaningful change.
U6 is only politically relevant versus U3 if the two have diverged over time. As you might expect, the two increase and decrease in near lockstep [1]. The U6-U3 gap widened during the Great Recession but is narrowing now. It's about a point higher than it was the last time U3 was at current levels. This is significant, but it doesn't make the trend or relative value of the U3 rate less meaningful.
I don't think it's baseless. The "sleight of hand" he asserts is the conscious or unconscious choice to draw conclusions from just the u3 numbers, and I agree with him.
He's arguing that if we look at a single metric, as is useful for mass media reporting, it should be the more inclusive definitions to help keep our society accountable.
This keeps popping up because many average people have their own understanding of unemployment and it's not the official one.
I'm going to go out on a pedantic limb and say that defining U3 as the "official rate" of unemployment is misleading.
There is no such thing as a singular unemployment rate, and we could be more transparent when we talk about it. Being clear that we are referring to the U3 indicator of unemployment could help raise the question of nuance for average people.
Faulting people for their illiteracy doesn't help move us forward. If we find a way to make them literate, this goes away.
Uh, this metric is nuts, because it views anything that isn't 9-5 on a payroll as 'not a real job'. That ignores everything from independent contractors to seasonal work. These are huge components of the economy and always have been.
So what does a movement in the metric even mean? Does it mean that people are working less, or does it mean that more people are self employed? Or students longer?
I think wages are a more insightful way of estimating labor supply and demand. It's not great news:
"U.S. real (inflation adjusted) median household income was $51,939 in 2013 versus $51,759 in 2012, statistically unchanged. The 2011 level was $51,842 and the 2010 level was $52,646.
In 2013, real median household income was 8.0% lower than the 2007 pre-recession level of $56,436.[1]" (wikipediarite)
Wouldn't U3 be the only most likely to stay the same, though? You could basically consider that rate as the "recently fired/quit" rate. I'd think a "people who have given up on work entirely" rate would be much better.
> The BLS puts out 6 different unemployment statistics for every period. U3 is the "official rate", but you can also look at the other ones, including U4 = U3 + "discouraged workers", U5 = U4 + "marginally attached" workers, U6 = U5 + part time workers who would like to be full time.
There's nothing misleading about the 5.6% figure. That's the number, and the details on how it's calculated are freely available. If you don't like it, choose another value, make your own adjustments, whatever. Besides, the absolute values matter very little; the trend is what counts.
I found this funny:
"None of them will tell you this:"
Really? I don't think there's a discussion about unemployment on the internet that doesn't mention the fact that certain people are excluded from the calculation of headline unemployment.
Those using U3 to promote a positive narrative all know that the general public mistakenly believes "5% unemployment" = "95% of people who want to work full time are working full time."
Under U3, 5% unemployment is considered more or less normal. Sometimes economic booms dip below that (at which point you usually get contractionary policies to prevent inflation). But 5% will be reported as good news.
If U6 was the headline number, "normal" would be 8-9%, and that would be reported as good news. I see no reason to believe that the absolute difference between those numbers would have any effect on politics or policy.
The problem is the media, White House, etc all don't use those metrics for the current numbers, and then compare them to previous numbers that do include these other categories.
All satistical mesures are adjusted to suit the UK's ONS is going through this with a replacement for RPI/CPI infaltion mesures.
The first new mesure CPIH did not come up with the figures the govenment liked so the ONS wher told to go away and try again. Thsi is first hand info from an insider.
Unemployment is also subject to fiddling one previous UK govenment put presure on Doctors to sign people onto disablity - to reduce the headline rate.
This is really great, and something you should be proud of.
Here in Germany, there's just one unemployment number, and its measurement is adjusted some time to time.
So in theory, you could have a raising unemployment rate but decreasing official numbers, just by adjusting the definition from year to year.
And in practice, nobody doubts that our government does exactly that. It's really sad.
Well, I doubt they'd do that. Having worked with Germans, I find it difficult to believe that these numbers would be very easily conned by changing how statistics is done.
I am also quite sure that there are various different unemployment numbers calculated by German statistics officials, but the media may wish to stick something simple, which is probably the one that is also comparable across OECD countries.
Of course the varying measures are out there, but the most powerful ones are the ones which get press time (and generally only the most favorable looking ones do)
The standard rate (U3) doesn't take underemployed or those who give up looking for work into account, but the U6 rate does. The U6 rate in January of 2009 was 14.2% and it is now down to 11.2% from its peak at 17.1% at the end of 2009/early 2010. Is the economy still struggling? Sure. Is unemployment headed in the right direction? Absolutely.
Edit: One thing that people commonly like to do is compare the U6 rate to the U3 rates of the past. "Unemployment isn't 5.6%, it's really closer to 12% ..." That's foolish because it's an apples to oranges comparison. Yes 11.2% is high unemployment, but what we judge as the low/satisfactory unemployment rate would come in somewhere around 7-7.5% when looking at the U6 rate -vs- the 4-4.5% that's considered low/satisfactory using the U3 rate.
"The U6 unemployment rate counts not only people without work seeking full-time employment (the more familiar U-3 rate), but also counts "marginally attached workers and those working part-time for economic reasons." Note that some of these part-time workers counted as employed by U-3 could be working as little as an hour a week. And the "marginally attached workers" include those who have gotten discouraged and stopped looking, but still want to work. The age considered for this calculation is 16 years and over."
>>The standard rate (U3) doesn't take underemployed or those who give up looking for work into account, but the U6 rate does. The U6 rate in January of 2009 was 14.2% and it is now down to 11.2% from its peak at 17.1% at the end of 2009/early 2010. Is the economy still struggling? Sure. Is unemployment headed in the right direction? Absolutely.
But the decrease in unemployment and underemployment still don't paint the most accurate picture, because a lot of people who became employed did so at lower pay. I mean you may be employed full-time but if you're making 25% less than what you did before the crash, it's difficult to make the case that things are improving.
Can you share any information about people taking the same job for less pay? I haven't seen evidence of this, but I don't doubt that it's happening in some places. I'll admit that I live in sort of a bubble because my salary has doubled since 2008 and the salaries of many of my friends and family have grown quite a bit as well. Granted, most of the people I know work in some sort of tech-related field.
I don't have any citations handy, but there are a lot of stories, both reported in the press and relayed anecdotally, of people who got laid off during the crash and then got re-hired at lower pay once the dust settled.
On top of that, a lot of people were unemployed for a long time and then had to jump on the first offer they got, which often paid less.
One reason Economists are interested in Unemployment is because when it reaches a certain level it puts pressure on prices through upwards wage pressure (fewer people looking for work means employers need to pay more.) Defining Unemployment narrowly as only those actively looking for work and recently unemployed provides for a statistic best measures the labor market's functioning.
As others have noted, there are many other statistics that are collected which can elucidate social concerns.
That shows problem with the official number though.
If unemployment is down, wages should be up. But wages are down. That implies the unemployment rate is not accurately reflecting the true supply of labor.
Or, it shows what I believe: demand for labor is decreasing even as the economy grows.
This is wrong. Wages are rising. And as slack continues to be removed from the labor pool, wages will continue to rise.
From a week ago:
"An important measure of household income rose in December by the largest amount in nearly 8 years, signaling a long-overdue rebound in family earning power."
"Data from Sentier Research show that median household income in December rose 3.3% from the year before, the strongest year-over-year reading since October, 2006"
So, incomes were flat or down for 14 years, and have since slightly rebounded to be just 4% less than in 2000, not 8% like they were. Shall I pop the champagne or do you want to?
Of course wages were flat or down, there hasn't been a particularly strong - or sustained strength - labor market since 2000. In the 2005-2007 time frame there was a brief respite, and that of course was not only fake (powered by the housing bubble) but crashed.
Fact is, once enough slack is removed from a labor pool, wages rise. Happens every time.
It's exactly what occurred in the 1980s and 1990s. Wages weren't booming in the 1990s until the unemployment rate got to a certain low level toward the last several years of the decade.
I wouldn't expect wages to rise when U3 unemployment is 7% or 8%. I would expect to see it at closer to the 4% to 6% range. That's historically what has been the case, and we're seeing it happen again right now. If we add another ~3 million jobs in 2015, wages will rise at a healthy clip.
>Or, it shows what I believe: demand for labor is decreasing even as the economy grows.
I hope this is the case. Automation should be putting a great deal of workers out of the labor force. The question is how can we deal with it: through workforce education and skill retooling? Through social assistance programs? It will likely be the question of our generation.
Skill retooling would help to an extent, but one programmer today can do more work than 10 programmers could do 15 years ago, or maybe even 10 years ago. That trend isn't going away.
Look at Django. If you include the hundreds of open-source modules with everything from messaging to billing to social media already coded, you can string together web apps in an hour that would take whole teams months and months from scratch.
Within the next decade or two I'd estimate that programming will hit its peak employment and start to decline as more and more work is automated.
Perhaps, but consider how much of the world still isn't digital (entire industries). Most business isn't - way more money flows through meatspace. I also think there is a good chance VR or AR will create another economic boon comparable to the Internet within your time span.
And to be clear, there's still plenty of opportunity. Something like 3 billion people are supposed to come online in the next decade, there will be tremendous opportunities to create solutions for problems we can't fathom. But my point is those solutions can be implemented by a fraction of the programmers that used to be needed.
And while there will lag between VR becoming popular and its design process becoming automated as well, it will still happen.
I also don't think this is necessarily bad, I'm just trying to point out that the conventional wisdom of "if we send people to STEM fields we'll keep the traditional economy intact even with automation" is not a long-term solution. The logical end-result of current tech trends is you imagine something and it appears in front of you almost instantaneously, no coding required.
As others have said, raw creativity will take precedence over technical skills, and most realistically we'll need a basic income and severely reduced workweeks.
> Unemployment is because when it reaches a certain level it puts pressure on prices through upwards wage pressure
Unfortunately, the policy response seem to not be to wait for inflation to appear, but to change policy to increase unemployment whenever it crosses a magical threshold.
I fear that 1999 was "peak labor" -- the point at which technology started to destroy more jobs than it created.
We HN types live in a bubble in which times couldn't be better -- but in the larger economy there are fewer jobs paying and they're paying lower wages. It's troubling.
I'm not sure you can call it being "freed" when freedom in this context is the freedom to starve or live on disability/food stamps/whatever you can find.
And while I agree that economic systems can and should be changed as we shift towards a post-labor society, I'm worried about political obstacles to that. Even in the height of the worst recession in 70 years, we couldn't get Congress to approve food stamps for people out of work. How are those same politicians going to feel about cranking the work week back to 20 hours and tripling the minimum wage to make everything balance out? And if companies end up having to pay the same in labor costs to offset their automating, then what's the point in them automating? Will we actually see automation-enabling technology (3D printing, robotics, etc) hit their own peak and slide backwards in the face of higher fees/social unrest/political change/etc etc etc?
It's a trickier situation than you're giving credit.
>How are those same politicians going to feel about cranking the work week back to 20 hours and tripling the minimum wage to make everything balance out?
They will feel how the people tell them to feel (ideally).
Now, the real problem, how to change people's minds?
I see that as a job well suited to HN frequenters: intelligent, imaginative, creative people need to take their responsibility as harbingers seriously and evangelize for a better future. Smack one molecule at a time and eventually the whole pot boils. Show people that the way things are done are not necessarily how they must be done. As a group, we've done a pretty good job in certain areas but I definitely see a lot of reluctance to tackle macro-social problems with the same zeal as attacking other historical accidents that impede progress like Uber taking on cab companies.
It's tricky, sure, but its all in our collective head.
Well, the overwhelming majority of people support an increase in the minimum wage, immigration reform, and a host of issues that Congress has not budged on. Why? Because they're beholden to a handful of special interests. I consider myself liberal, but if we're being bluntly honest both parties are stuck for the same reason. Even if one is worse than the other. ;)
I absolutely agree that we are in a great position to influence debate. If anything needs to be disrupted, it's the political system. I wish more folks with our skill sets were interested in tackling something like that.
> I'm not sure you can call it being "freed" when freedom in this context is the freedom to starve or live on disability/food stamps/whatever you can find.
Let's try the previous scenario, then. Is it "freedom" to do easily automated mindless manual drudgery?
The question as phrased can't really be answered. "Freedom" means different things to different people; but I would say that while a manual job that you may consider mindless could be considered freedom to some people, not feeding your family is absolutely not freedom in any sense.
And what people seem to miss is that every task - even the task of raw creation or idea generation - can be considered trivial once you sufficiently understand the process behind it. Any job or skill can be broken down into easily digestible bits, and once that's possible the system can be automated and scaled.
Hell, company generation is the same way. Look at Y Combinator. They've created a system that generates companies in a very automated, predictable fashion. They have an algorithm for making companies successful. It isn't 100% successful (yet) but any self-aware system will improve itself over time as the process is better and better understood.
So while I would obviously prefer to be running Y Combinator than assembling brooms in a factory, I'm not sure you can consider one more valuable or "worthy" based off of whether one is more "free" or not, especially if your definition of freedom is something that can't be automated - aka reduced to an algorithm.
I'm with you. Long term, this is good news. If we had basic income I'd be cheerful rather than worried.
But we're not there yet, and you can't tell someone that is unemployed and can't find work that they should be happy to be free of the time sucking drudgery of employment. That's clearly a "let them eat cake" response.
How might I contribute to making Basic Income happen? I've been seeing more and more people talk seriously about it, which seems like a great sign, but perhaps not enough to change anything. Are there any advocacy efforts I could donate to?
Sell your circles on the idea. Show them why its cheaper than the alternatives. Show them all the benefits . Put a sticker on your laptop, wear a t-shirt, write a politician, go on TV. Start giving away your money to someone (implement your own "basic income" to someone really really poor) and (b/v)log/write a book about it . As soon as it becomes "How could we not do this" in people's minds, it will happen.
Has anyone considered creating a Basic Income "charity"? There's nothing really stopping anyone from paying another person to just live their lives. It would basically be a grant system with no strings attached.
Let's make Basic Income a reality and cut out the government middleman/waste from the process!
I think we should develop an online service where we pair working individuals with one or more local individuals who are currently not working or have chosen not to work. Every month, the working person gets to meet up with the non-working one to check in on them and make sure they're doing alright. Maybe even treat them to lunch just to be neighborly. Finally, at the end of their meeting, the working individual writes the other a check to cover their expenses for the month.
I think it's safe to call Basic Income a charity, or at least charitable; it's a very Christian thing.
Not to mention you can actually get tax breaks for giving to charities, meaning you can stop giving taxes to the Govt and start to give it towards a "program" you care about. Less bombs and more beds.
What you can do to truly contribute to making Basic Income happen is to actually get yourself ready to support it. I'll explain what I mean by this.
I think that a lot of people hear Basic Income, and if they have some form of compassion for their fellow man and an awareness of computers currently allow and where they are headed, they understand that pretty soon we'll have to figure out a way of living in which a large portion of the population, or at least a large enough amount to comprise a real threat to social stability, will be unemployable. Completely. There will be no job that actually contributes to moving our society forward that either a machine or another person with greater abilities will not be better suited for. There will literally be no place in the economy for them to contribute.
So what do we do with these people? Well we say that they get a Basic Income, enough money to live, and not just survive, but live. We're not going to be able to consign a hundred million people to lives of depredation, so Basic Income is going to have to cover the basics and some of the stuff that makes life good.
In a lot of these discussions there are examples of the money currently spent on the welfare bureaucracy and how all that money can be rolled into BI, and I think that a lot of people stop listening there, convincing themselves that we'll be able to create a BI, provide for people who can no longer work, and nothing in their lives will have to change. And my gut tells me that this is dead wrong.
So what can you do to contribute to making BI happen? Well you can realize that taking care of those people is not going to be free. You can start making yourself comfortable with the idea that taxes will have to go up. Definitely on the ultra rich and the very rich, but also on us programmers, sitting here on HN and complaining about making 180k a year because San Francisco. BI is going to mean that the people we put out of work get taken care of, but its also going to mean that you'll be driving a camry and not a tesla. Because we are the top 5%, and even if the 1% and the 0.1% are definitely going to have to be taxed way way more, we are going to have to do our part for the 95% below us. You've got to square yourself with the possibility that having a job will be something that very few people get, and that you will not be rewarded with incredible riches for doing so. BI will probably bring a bunch of us a lot closer together, and hey if we're lucky it might even be awesome Star Trek style.
But to get there we're going to have to sacrifice to take care of our fellow man, and it won't all just magically take care of itself. If you start preparing for this now, hopefully you won't be like so many of the baby boomers I see, my parents and their friends included, who pay lip service to taking care of their fellow man, but whose actions in the voting booth betray these principles, as they just can't bring themselves to make even a small sacrifice in their current living condition. That's what I try to work on every day, making sure that I am not so addicted to my lifestyle and material goods that when BI and a 90% marginal top tax rate are on the ballot, I don't blink and find myself voting for the man who promises "tax cuts and forget about the other guy".
That, I think, is the biggest thing you can do to make BI happen.
> "Well you can realize that taking care of those people is not going to be free."
Virtually every discussion of basic income on the internet these days avoids doing even the most basic arithmetic. So I'll give a very oversimplified set of calculations below. The details can be nitpicked ad nauseum, but this is essentially Feynman-style estimation, so please see the forest and not just the trees.
First, some facts:
According to the BLS, the lowest quintile of Americans spent $12,955 on goods and services in 2014 [1].
The US adult population in 2014 is about 242.5 million people [2].
So if we wanted to provide a guaranteed unconditional income equal to the average yearly expenditures of the bottom quintile of Americans, the cost would total about 3.14 trillion dollars.
Total U.S. tax revenue in 2014 was 3.2 trillion dollars [3].
So a basic income program that merely provides poverty-level income for all Americans is going to cost all of our current federal tax revenue, and we are already running a federal defecit.
This is plainly not feasible without vastly increasing tax revenue.
You could argue that state and local revenue could pick up the slack, but states and municipalities are generally under severe budgetary pressures as well and have even less power to raise additional revenue. Even if all tax revenue in the US from any source is considered accessible for a basic income program, that pile of money is only about $6 trillion, so a poverty-level basic income program is going to consume half of all tax revenue collected from any source in the US.
All of this is an optimistic calculation. It doesn't account for the contraction of the economy (and thus tax revenue) that would occur due to people ceasing part time work or other low paying jobs. Or the increasing amount of federal revenue directed to servicing our national debt [4], which will make any basic income system increasingly unaffordable in the future (absent corresponding economic growth). You could alleviate some of that economic contraction by taxing the basic income itself (possibly conditionally, based on economic circumstances), but then you are providing a post-tax basic income that doesn't even meet the poverty level.
The fact is that the demographics of the United States simply prohibit any meaningful basic income system from working at the present time. It simply won't work without increasing tax revenues to levels that will destroy the economy. And this is ignoring the political obstacles that would have to be overcome (such as placing most of the additional tax burden on the 1%).
Our existing welfare systems, inefficient and bloated as they are, at least attempt to target those who are most at need. If you try to make a basic income system that essentially replaces existing welfare programs by taxing most of the basic income back from people who exceed certain economic threshholds, you are doing little more than inefficiently adjusting tax brackets.
It's a nice dream, but somebody has to pay for it and right now nobody can.
I have often heard people make the back of the envelope argument you are making. I'm unconvinced.
Everyone I've heard seriously propose a basic income has coupled it with a progressive increase in federal income tax, so that individuals earning above $50k or so would receive no increase in their BI+earned income-federal income tax.
So the actual ratio of basic income provision to federal income tax would be much lower than 1:1. 1:2 seems more reasonable.
Then, the expectation is we would significantly reduce spending on distortionary and expensive bureaucracy like food stamps, welfare, minimum wage, school lunches, and housing subsidies.
I imagine overall people in high income brackets would pay higher income taxes to the extent that we wanted to balance the budget.
We can also do things like spend less on bombs ($500B less IMO), end all corporate subsidies (either tax reduction or cost shifting like agriculture subsidies) . Additionally we will save a fortune from how we presently treat poverty symptomatically. Someone in jail costs upto $168K a year, homeless people cost a fortune to the healthcare system[1]
The list goes on and on. Its cheaper to do BI than it is to do what we're already doing. It doesnt cost $3T _more_ it costs less than what we _already_ spend.
Yeah but there is one thing that people doing quick mathematics ignore when they pronounce Basic Income unworkable. And that is that it will absolutely have to work in some manner. That's why I am working to mentally adapt myself to it and get ready to support it. Because it is coming one way or the other.
You are not going to put 50% of people of work, and you're not going to consign a hundred million people to a worsening standard of living even as those with capital get to live like gods. Its not happening. Period. End of. So however it gets done, the fruits of automation will be shared in some way with the majority who do not own factories or the factories will be smashed. We can bandy about numbers all day, and talk about levels of taxation that will "destroy the economy" but at the end of the day the bottom line is that we will be taking care of those who can't work, and that is probably going to end up including you. So you should probably start thinking about how we can make that happen in the least disruptive way possible, and what you can do to make it happen.
> "Yeah but there is one thing that people doing quick mathematics ignore when they pronounce Basic Income unworkable. And that is that it will absolutely have to work in some manner."
This is known as the head-in-the-sand approach and it is obviously nonsense.
Basic income is one proposed solution to the increasing automation of work and population growth. It's achieved such a cultlike status in some circles that those within them forget it's not the only possible solution.
And, truthfully, there is no guarantee that a solution will even be found. If one is, it may not be a "solution" in the usual sense. Here are some other possible resolutions to increasing wealth concentration combined with population growth:
1. State redistribution of wealth via tax and other changes
2. A shift of wealth from industries that automate things to those that produce valuable things or services which cannot be automated (i.e. as automation becomes increasingly cheap, competition in industries which rely on it results in those becoming commodity industries)
3. Society chooses to tolerate an increased number of homeless and poor people and their suffering rather than make changes to its tax or legal structure.
4. Artificial population control. A world with decreasing job opportunities can be sustained as long as population decreases in proportion.
5. Revolution
And there are other options, some completely unseen.
> "You are not going to put 50% of people of work, and you're not going to consign a hundred million people to a worsening standard of living even as those with capital get to live like gods."
The exact numbers may not be as dire as 50%, but historically plutocracy has been the norm and not the exception. Plenty of egalitarian societies (for varying definitions of "egalitarian") have sprung up and died off, but plutocracy as a system exhibits long term stability due to the nature of wealth and inheritance. Whatever its moral deficiencies, plutocracy is simply a consequence of the fact that wealth naturally tends towards concentration rather than dispersal.
The real problem with basic income is that the inspiration for the system not only relies on an unproven assumption about the future, but one that has no historical precedent: the destruction of job opportunities for most people without a corresponding increase in new opportunities. The former has happened over and over throughout history but it has always been followed by the latter.
What we've seen over the past century has been a steady automation of mundane tasks displacing menial labor and an increase in the number of people in "creative" professions. Until strong AI comes along, and in particular a strong AI that enjoys making art, there will always be a need for human beings to serve in the latter category of jobs.
A bigger economic problem, and one which actually does deserve serious thought and consideration, is how to make the economics of a creative economy work. The old feudal style model of publishers lording over their effectively serf-like artists (while the latter churned out content whose profits were largely eaten by the former) plainly doesn't work.
The bottom line is that changes are coming, and while those changes can't be stopped it is hubris to claim that one and only one never-tried-before solution will solve a never-occurred-before economic problem. The reason you never see faithful proponents of basic income discuss it in terms of hard numbers is because doing so makes it obvious that other solutions will have to be considered. The mainstream proposals for basic income are an economic religion complete with all the hallmarks of religion: an unfalsifiable dogma ("in the future, robots will take all the jobs"), guilt and fear as a means of control and persuasion, and an apocalptic narrative. But they are most definitely not economic science.
Contrary to the frequent assertions that it has never been tried it has actually been tried about five times in North America alone, several of the studies were in the US. One very thoroughly documented one Canada is described on Wikipedia: http://en.wikipedia.org/wiki/Mincome
Your definition of "time sucking drudgery" is another's way to make a living.
Sometimes the factory job that was just automated was the only job in town, and companies aren't going to retrain a 50y/o to program computers. Many people just don't have the resources to learn a new job, or move and find a similar one.
Right now we're on a path to automate jobs more quickly than people can reorganize into new careers. In the long term the economic systems will work themselves out, but in the short term there's a huge potential for social and economic unrest.
Except any drastic change in the economic system (say, a Basic Minimum Wage) would come about only through strife. The people with entrenched interests in the present order aren't just going to roll over and say adios.
I'd probably want another system to replace the current one as fast as humanly possible.
It's sad that for all the progress we've made we have to say "If these people don't spend all day doing something mind numbing and tedious all day their families will suffer!".
Is that how we want people deciding to do what they do with the bulk of their time, avoiding suffering with their family's survival at stake? It seems like a way to bake terrible exploitative inefficiencies into the system.
Then again, I am in a very 'hopeful for humanity' mood today. Perhaps there are a lot of people for whom, even in the best of circumstances, can only hope to contribute just that much to society.
> I'd probably want another system to replace the current one as fast as humanly possible.
Exactly how is the people in the receiving end of automation to develop the many skills needed to put together a "replacement system"... overnight... and execute flawlessly with no safety net below???
> Is that how we want people deciding to do what they do with the bulk of their time, avoiding suffering with their family's survival at stake? It seems like a way to bake terrible exploitative inefficiencies into the system.
YES, pretty much it. This is not the first time this has happened. Think of the liberation of the slaves in 19th century US, or women's right to divorce. If those freedoms do not come hand in hand with reliable access to means of production, they predictably turn into weapons. You get "free" but get cut off access to any legal means of earn your keep. Then you are free to either die or go rouge and join the underworld of predators and parasites.
While this is true, the "freed" minds (read: unemployed) aren't able to contribute to the current economy because their skills are no longer relevant. Do you see a change happening in the near term that is going to help these "freed minds?"
I, personally, am hoping for a more creative based economy.
We must tackle some serious issues before that is viable as I'd like it to be, though.
First is that we must value creators and be eager to pay them for their work. Right now that is a serious problem in an era of glorified piracy. Hopefully, with technology bringing creators closer to their audience, this attitude will change.
Second, it wouldn't hurt to turn our incredible per capita productivity into more free time. This is time to both create and consume more of those creative works.
"changing them when they become a problem" is a huge understatement. changing economic systems is incredibly complex and extremely hard to predict. even just engineering enough people to collectively act is very difficult.
Labor force participation isn't adjusted for age of the population, so as a population pyramid squeezes through, like that of the baby boomers retiring, you would see a peak and drop naturally.
You assume the Baby Boomers can retire, and I assert that they are the most indebted, non-saving, addicted to their lifestyle cohort the US has ever seen. The only natural drop is when they drop dead naturally...but they'll go out kicking and screaming, demanding free healthcare that they didn't pay for, etc, etc.
It includes 25-54. Currently the age of retirement for full Social Security benefits is 67. Seems likely that they're missing a large chunk of Baby Boomers that are working longer.
...and not accounting for the health care costs, present or future, which the Baby Boomer cohort is going to take out from the economy from a productivity / wealth standpoint. Basically, to exaggerate, the inheritance tax is relatively a moot point because other than a small percentage, most Baby Boomers didn't save enough to retire and didn't pay enough into the system to keep them alive from 67-80 something, because there has been little to no upward mobility for the rank and file spend and be taxed lower classes.
Labor force participation rate should be dropping. The baby boomers just started to retire. Since they make up a much larger proportion of the population than their age range implies.
I'm not sure why this is being reported as new or interesting. "They don't count people who have stopped looking for work" has been reported to death for decades (always, year after year, decade after decade, as if no one had ever pointed this out before... it's one of those strange "perpetually surprising" stories, like "engineers look to nature for inspiration".)
What is new and interesting is that in the past six years the American labour participation rate--the fraction of the working-age-adult population that is either employed or looking for work--has plummeted from 66% to 63%: http://data.bls.gov/timeseries/LNS11300000
To get a sense of what a big deal this is, you can re-run that chart to cover the full range of data from 1948-2014. After being flat at about 59% for two decades, the LPR begins to ramp up in the late 60's as Boomer women entered the workforce. It exhibits a broad flat peak from 1990 to 2008 at about the 66-67% level, and then starts its dramatic decline in sync with the financial crisis, and is now back at a level not seen since 1978.
There is a fairly desperate attempt to spin this as "Boomers retiring" but that runs into a problem of simple arithmetic: the population of the United States was 203 million in 1970, when the ramp-up in the LPR began. It is now 320 million, a factor of 1.5 higher. So for every Boomer retiring, there should be 1.5 new workers entering the workforce. Where are they?
Agreed. They taught this in high school economics class--a public high school economics class. I think the article is playing into the political rhetoric. For a politician to use the Unemployment Rate as a benchmark is fine as a delta since all the U values seem to track each other if this chart is accurate: http://www.macrotrends.net/1377/u6-unemployment-rate
3% of what? I would not characterize that as plummeting, but after looking at the graph you linked to, it very much looks like a "plummet".
It doesn't sound like they have a definitive answer of the cause. The data is done by survey, and missed surveys are "imputed". (ftp://ftp2.census.gov/programs-surveys/cps/techdocs/cpsmar14.pdf) So I strongly suspect (but cannot support) there's probably some kind of assumption of a gaussian somewhere, and of course human behavior can assume many different "forms". In other words, I think they should be providing an error rate with these numbers. The other aspect is they probably have faith in the Gaussian I suspect.
I generally agree with your comment, but I think you are oversimplifying the demographics and that leads to your 'why' question. If you get a bit more specific with numbers at various ages and cohorts, plus discouraged workers, you don't have a big hole in the arithmetic.
Realistic numbers for unemployment and other economic statistics are available at "http://www.shadowstats.com". These are mostly computed from older Government definitions. Over the years, the way some key numbers are computed have been changed to make them look better. Shadowstats uses the old computation methods, which are more honest. It's a paid service ($175 a year) for people and businesses who need better numbers.
Their unemployment rate, currently at 23%, includes long-term discouraged workers, which the BLS stopped counting in 1994.
Their inflation value is based on the way inflation was computed before 1980. It includes house prices. Their value is currently 8%. This compares to the official number of 2%. Shadowstats has it right - increasing real estate prices are inflation.
Shadowstats is the dumbest thing I've ever read. If they have it right on inflation, the US has been in a recession since 1988. If they have it right re: house prices, houses are worth 60% less than they were in 1980 and we never had a housing bubble. One important note, Williams from Shadowstats definitely doesn't use 'the old computation methods' -- he just arbitrarily adds a 'factor' to the CPI rate and claims that's the real number.
The BLS has published volumes about the idiocy of the assumptions behind Shadowstats. As have many economists from all over the spectrum.
Literally nobody worth listening to takes them seriously. Why would banks willingly offer 30-year fixed mortgages at 3.6% if inflation was 8%/year?
Think for a moment what that means for real GDP growth the
past three decades. Nominal GDP averaged about 5% from
1986 through 2013. Of that 5%, 2% was inflation and 3% was
real GDP growth. If inflation was really 5% — and often,
according to Williams, it was much, much higher — then
there has been no real economic growth in America all that
time. Actually, we have probably been in a long depression
from the Reagan years forward.
But Shadowstats is not calculating inflation any
differently. They are not using the 1980s or 1990s
methodology that they believe would be higher. All
Shadowstats is doing is taking the CPI data and adding
on an arbitrary constant to make it look like inflation
is higher!
While I agree that Shadowstats is likely wrong, your counterfactual statement is not really counterfactual:
In the 70s and even early 80s, it was possible to support a family of 4 on the income of one average wage earner. In the 50s it was even a good life. Today it is nearly impossible to do, so something very significant happened to the value of money that is not reflected in the official inflation/wage disparity.
TVs and computers cost about 90% less than they did in 1980, and that's something the BLS happily takes into account in more ways than one ("hedonistic adjustment"). If you assume, e.g., that houses right now are worth what they were worth in 1980 and work everything out form there, it's a lot less inconsistent than you think. It is inconsistent, sure, but at about the same level of inconsistency that official BLS numbers suggest.
> Why would banks willingly offer 30-year fixed mortgages at 3.6% if inflation was 8%/year?
Because they don't know how to get a higher return, regardless of what inflation really is. (Of which there are multiple definitions - some based on prices, and some on money supply - and they are useless if you are not consistent in the definition you use)
And the AEI quote is hyperbole. Read e.g. Karl Deninger for consistent numerical proof (if you accept his methodology, which is not mainstream but definitely not unreasonable) that indeed, all GDP growth in the last 30-40 years is smoke and mirrors.
Suit yourself. I was replying to anecdotes with anecdotes - note that the quotes you gave do not actually bring anything to the table (neither do mine).
But I do urge you to read denninger. You will very likely disagree with him (I'm not sure if I agree with him), but he is consistent, and is very well supported by data. Whether you accept the axioms or not is up to you. As far as track record with predictions go, he has a significantly better one than essentially all mainstream media.
Ask yourself why you accept the GDP growth is real. If you do just because everyone else does, without looking at the numbers and at alternative explanations - that's religion. Which is fine - none of us has time to evaluate every single thing we believe in. But it is important to acknowledge it for what it is.
And for that matter, ask yourself why you accept GDP as a measure of growth and welfare - Kuznets, the person who came up with the definition thinks you shouldn't.
The fact that if Shadowstats' figures are correct, we didn't have a housing bubble and have been in a 30-year recession are far from anecdotes. As is Williams admission (referenced in the Aziz piece) that he doesnt actually calculate the figures using the old methodology but rather just adds an arbitrary factor to the CPI data.
I 'believe' that GDP is higher and inflation is in check because I can buy a 60" LCD for $400, a hybrid car that gets 45mpg and will last 200k miles for $18k, I can get a 30-year mortgage for well under 4%, my cell phone is faster and more capable than a 5-year old laptop, I can get any physical good delivered to my door in 12 hours, doctors can perform miraculous procedures at podunk hospitals with fantastic success rates, and there are free courses available from the best schools on the planet in just about every subject.
Do I have to work longer hours than my parents did for a similar quality of life? Perhaps, but it seems like that is far more likely due to globalization and the fact that there are billions of people participating in the global economy rather than some conspiracy. Do I think GDP is a perfect measure of growth or welfare? Not especially. I think median household income combined with hours worked is a better gauge but that doesn't mean the GDP stats are useless.
I'll gladly read some Denninger but I'm not sure how you explain the massive global shift from abject poverty to something resembling a first-world existence without economic growth.
Some people would argue that Social Security Disability Insurance is soaking up a huge number of people that would rather be working as well: http://apps.npr.org/unfit-for-work/
"But, in most cases, going on disability means you will not work, you will not get a raise, you will not get whatever meaning people get from work. Going on disability means, assuming you rely only on those disability payments, you will be poor for the rest of your life. That's the deal. And it's a deal 14 million Americans have signed up for."
"Gallup defines a good job as 30+ hours per week for an organization that provides a regular paycheck."
Perhaps this definition hasn't caught up with the increase in freelancing and self-employment. Underemployment, particularly among lower skilled workers, surely is an issue in the U.S. but Gallup's approach could be undercounting some newer types of "good" jobs.
Yeah, agreed, that's a terrible definition of a good job.
1) Many people live off investments, pensions and passive income
2) Many people have income that is not regular or predictable, but large
3) Many people have good paying jobs that don't require 30 hours per week
That's a very narrow definition. That's why they are only asking for a target of 50% I guess.
On the subject of Basic Income. I think most people are missing some very important points by concentrating so hard on the costs, that is, the money provided to the recipients of the Basic Income.
- Poor people spend pretty much everything they get and they do so locally, so a very large proportion of the BI will be immediately spent in the local economy thus increasing the opportunities for people to provide goods and services.
- Having an income that will prevent you starving to death or having your house or car repossessed means that you have the opportunity to turn down a poorly paid or dangerous job. This will go some way to rectifying the imbalance of power between employees and employers and drive up wages at the bottom end
- BI is not charity and is generally not intended to be means tested; every citizen gets it rich and poor alike. It is income and taxable in the normal way.
"many Americans... don't know... Few Americans know this"
"wondering what hollowed out the middle class"
Perhaps the clueless people who don't know anything about what things mean ( the people this article is targeted at ) are the same people who are unemployed/under-employed ( notably also the group this is targeted at )
Summary of tfa: "The number news refers to as unemployment does not mean what you thought it means; it means X" Great, now how does this tell us anything we couldn't learn by looking up "unemployment rate" on wikipedia?
now how does this tell us anything we couldn't learn by looking up "xxx" on wikipedia?
That applies to many things written. Not sure why you're singling this out. If every blog post written had to include original research, there wouldn't be much writing going on...
This is hacker news, I expect that things posted here are noteworthy to people who know what they are doing and can research stuff they are interested in for themselves.
Posts of the type "Did you know that the tooth fairy isn't real" are a waste of time to the professionals who read hacker news.
Also, anything I spend my time reading through expecting something unique / new and find nothing I respond this way.
It shows the real unemployment rate, counting short-term discouraged and marginally attached workers, to be around 22-23% today. That's up from around 12-13% before the 2008 recession.
How on earth is a vague chart, with absolutely no methodology, promoted by a charlatan to sell subscriptions "arguably more accurate" than a completely transparent nationwide survey?
Especially when that survey matches with literally all of the private measures of employment.
My favorite thing about Shadow Stats is that they claim inflation is really high and the government numbers are fake, but they haven't increased their subscription price since as far back as it goes on archive.org.
Wow, that's a lot. But it could be right. There are a lot of people out there who are under employed, living on spouse's income, working under the table (hence under the radar), etc.
I'd like to conduct an experiment in special economic zones as was done in China and other developing areas in the recent past. Designate some place (my choice would be an impoverished inner city ghetto area) as an SEZ, and make it: no corporate taxes, no income taxes; no municipal, county, or state taxes; no unions; and minimal regulations - e.g., waive EPA environmental impact studies, waive minimum wage (down to some minimal amount like $4/hour). Guarantee these conditions for the next 10 years.
I suspect you'd see factories, plants, and offices flock to such a zone, and there'd be a mad scramble for real estate. Ancillary services would also boom--taxi, food, construction, office supplies, delivery and courier services, etc.
I doubt it would ever happen given the number of laws and rules you'd have to waive, but it would be an interesting experiment in cutting through the red tape and getting back to basics.
Just out of curiosity, do you know where he gets his statistic for long-term discouraged workers (he defines his measure of unemployment as 'U6 + long-term discouraged workers'; U6 only includes short-term discouraged workers, who looked for work in the last year but not in the last month.)?
The closest analogue I can find is the labor force participation rate, which has dropped steadily by a total of 3% since 2008[1]; this number doesn't seem to square with his chart, however, so I'm curious if you know his underlying data source.
The underlying data source of Shadowstats is a combination of the official numbers and a constant extracted from the source that is underlying all of us when we sit down.
It's interesting that so often everyone talks about how unemployment develops, but not how employment develops.
Unemployment statistics are not so useful, precisely for the reason given: people who've given up hope of finding employment are often excluded.
Employment statistics are much more real, because the taxman wants his own, so it covers everyone who actually works. Of course, there are imperfections here as well: people may be working part-time when they actually would like to have a full time job.
During the years 2000 - 2012, employment rate in United States has gone down from 74.1 % to 67.1 % [0].
In Germany, the rate has gone up from 65.6 % to 72.8 %. [1]
In Sweden, it is relatively unchanged, 74.3 % to 73.8 %. [2]
In Greece, the numbers have always been much lower: from 55.9 % down to 51.3 %. [3]
E.g. Korea and France are surprisingly low, in the 60's. Israel has increased during this decade a lot, and it seems to be due to more women working.
It seems like it's equally about promoting one of Gallup's products, the "good job" metric they link to. I don't see anything partisan in the piece, simply because the same unemployment metric has been used by both Republicans and Democrats to further their goals.
I don't see anything wrong with presenting facts unless they are wrong.
These facts don't look good on media outlets and Obama, but facts are facts.
What I want to know is if these facts are true.
This is an opinion piece though; there are facts (in the "lies, damn lies, and statistics" category) that state summary information about the world, and this author interprets those facts in a particular fashion.
There's not a lot of truth value one can assign to a statement like "A good job is an individual's primary identity, their very self-worth, their dignity -- it establishes the relationship they have with their friends, community and country." Well, I suppose one could if one were, say, Gallup and could poll on the question of how many people agree with that statement. But I'm unaware of such a poll at this time. ;)
Do you are think people who run polling organizations don't have political views? How about Pew? Yahoo? Even the AP? They all do. Why not speak from them? If it doesn't compromise their survey methodology, what's the problem?
If you don't know, Gallup was founded on an extremely ideological position: that public opinion matters, and politicians should seek to understand what it is as a guide, and we need tools and organizations devoted to studying it. It seems natural they would advocate for a better informed public.
I think that if the CEO of a polling company were to come out and endorse a candidate, I would have a really hard time trusting their polls on that race.
It seems more an opinion piece about the unemployment metric than about the politics. Granted, the White House is mentioned, but more for framing than any political slant.
The delta is the most relatable conclusion the average person can draw from the unemployment rate reports. Otherwise, without taking some economics classes, you're doomed to misinterpret.
The various unemployment rates are pretty clearly defined and U3 is arguably not the most meaningful one to use but it is considered the "official" rate.
I thought this too initially, but the problem is that the unemployed can shift from one category that isn't counted to another that is. Unemployment rate goes up, but the same people still don't have jobs.
What could be said is that it is a non-partisan measurement error both sides can abuse equally.
It makes sense that the rate decreases - people give up hope and stop looking for jobs, or get shitty 3hrs/week jobs, and thus drop out of official statistics, without any actual improvement.
Except that we don't track those numbers, so it could be that earlier in the recession more people were recently out of work, and looking hard, meaning they were counted in this number. Right now, it's been a lot longer, so perhaps many of them have given up, even if they need jobs, so they are no longer being counted.
The number of people needing jobs, regardless of searching might have gone down similarly to the reported number, or it might have stayed exactly the same overall. Without the information, we don't know. I certainly know a few people who need jobs and can't get them, and some of them aren't being counted. Maybe it would be good to find out.
The people not being counted are those people who are totally excluded from the workforce: disabled, students, retirees and other dependents.
The folks you seem to be saying are part of discourage and marginally attached workers, and are counted as part of the U5 and U6 measurement. When we talk about the large big pot of unemployed and want to work or don’t have enough work, U6 is the measure usually referred to.
I've been thinking for a while that there need to be incentives put in place for companies who short-change their their employees (and by extension, the public as a whole) by hiring 3 part-time workers instead of one full-time.
This goes towards the "good job" / "American Dream" aspect of the article. People shouldn't have to work 2 or 3 part-time jobs to make a living if they don't want to, just because those are the jobs available. If somebody wants full-time employment (for which they are otherwise qualified), it would be better for them to have that.
Of course, it is cheaper for the corporations to use part-time, because it keeps them flexible with scheduling/substitutes and due to added costs like benefits etc.
I have been trying to figure out whether it makes sense to offer tax incentives/penalties which would push the balance towards more full-time jobs instead of part-time. One piece I have envisioned is forcing employers to offer the benefits a full-time employee would receive prorated to part-timers, with a penalty added for splitting it up. Make them want to offer a full-time job instead.
The part I am worried about is whether the effect is too strong and prevents somebody who actually only wants part-time work from finding employment (e.g.: a student, full-time parent, senior citizen or handicapped person). There needs to be some part-time work available, but generally a member of the workforce probably wants a full-time job.
The issue is already the amount of regulations that attach to a full time worker. Adding more will only generate adverse affects.
Using words like 'forcing' and 'penalising' will work in the opposite direction to what you might hope.
You already identify the issue - full time workers require benefits and the like. For many small organisations, these make the cost of a full time worker prohibitive, so they fill in with multiple part time instead. The employer is incentivised to keep people part time.
You're proposing negative incentives, which may have the unintended consequence of eliminating both full-time and part time positions as companies opt to cut costs and outsource to overseas service providers.
The danger is real. There are very few activities which can't be done remotely today, other than... massage, food service, medical (but even then some can be outsourced, e.g. radiology).
I would prefer to see positive incentives, e.g. a tax break for every full time job that is filled domestically. Give them a financial reason to hire full timers, and they'll hire full timers. Punish them for hiring part timers, and they'll just move overseas, and then another few million people will be permanently unemployed or under employed.
Same as in Germany: Every government invents new possibilities to "count people out" of the official statistics. So the numbers fall, but unemployment stays the same or even rises.
Some of the hypothetical examples of out-of-work people the author uses are pretty unlikely, and seem intended to cast an artificially wide net for his argument: i.e. engineers and health-care workers and math degree holders probably have lower than average unemployment rates, yet the author paints a picture of them mowing lawns and losing unemployment (i'm not saying it doesn't happen, just that it's unlikely).
In a way, the author is committing the same sin as those he criticizes: he also oversimplifies the employment situation. The unemployment rate and the labor force participation rate vary dramatically by region and by profession (in California alone, compare the Bay Area to the Imperial Valley).
It's much better for some highly skilled individuals, especially in booming metros, and much worse for others, who are in either low skilled, or in regions experiencing secular decline.
Also, Gallup's own underemployment numbers (cited in the article) show both the unemployment rate and the underemployment rate at 7.1% and 15.9%, which is lower than where they were in Feb 2010, and that it is almost certainly lower than what they were in the depths of the great recession.
Nobody would argue that these stats aren't as good as they should be, but to say that things haven't improved at all is very disingenuous, which is why this reads more like political anger-rousing article than a well-reasoned op/ed. The latter isn't surprising considering that the first rumbles of the next presidential election cycle are here.
Workforce participation, median, minimum, and bottom decile wage are in many ways vastly more informative than unemployment numbers. Yes, even the expanded U6 values BLS provides.
Participation tells you how many people are working. Minimum wage tells you how well the worst-paid fare (and as Adam Smith notes in An Inquiry into the Nature and Causes of the Wealth of Nations, "A man must always live by his work" -- which he expands to mean: wages must provide not only for the laborer, but for a spouse, children, and the education of those children to provide for the next generation of workers.
Median wage tells you where the typical worker is. It's not skewed upwards by a few highly-compensated individuals as mean would be. If you and I are at a bar and Bill Gates walks in, the mean wealth has just jumped tremendously, the median not so much.
Bottom decile tells you how those at the bottom rung of the compensation ladder, though not necessarily at minimum wage, are doing. Smith has a considerable amount to say on this as well.
The biggest problem with unemployment (and other economic / econometric metrics) is that once defined they become political, and an change to more meaningful statistics tends to make the administration in power look worse.
Touting these unemployment numbers as a "big lie" is equally misleading. Especially when comparing this number to a past situation of which we don't know the disappointing details.
Just saying "only 44% of adults have a good job" doesn't sound like a good number either. This doesn't seem to count mothers, "house wifes" (if they choose that occupation voluntarily and gladly), college students and probably not even grad students.
Doesn't include retired people, investors, the rich, people with an irregular but high income, actors, singers, contract consultants, people taking a long vacation or sabbatical, people who own a business in the early stage, y-combinator companies...
Most interesting is this: Many people compare other countries unemployment to US U3 not US U6/U5 while countries with gov. unemployement benefits (unemployed are people who get money, which includes people not looking or with a small amount of income) have numbers more in tune with U6/U5 and should be compared to U6/U5.
This article reads like a transcript of a drunk guy at a bar explaining his political point of view. Lots of stated assumptions about what other people don't know, backed up with zero facts to substantiate any claims made therein.
He claims repeatedly that "most people don't know [some fact about what goes into calculating the unemployment rate]." I think actually most people who read the news do, in fact, know that people who have been chronically out of work and given up looking are not counted among the unemployed. How could they not? It was hammered home over and over in the midst of the recession.
He never provides any numbers to support the claim that a large percentage of people fall into that category. He just states that it's left out of the calculation, that few people know it, and then leaves you to assume that therefore this must be a significant percentage of the population.
Because it's directly comparable with the rest of the worked and is the measure we've used historically - both of which have value. If others decide U6 is the most important figure, it's reported in literally the same publication as the U3 figure and they can reference it accordingly.
I was once trying to compare US unemployment to other countries but was not sure which "U" statistic is closest to how others measure unemployment. Anyone has an idea for example within the EU?
One of the reasons the U3 definition won't be changed (or alternately, why the other U rates were created) is that it's harmonized with the other OECD countries' rates. So, say, a 6% unemployment rate means the same thing in the U.S., Germany, Japan, Greece, etc.
The issue of the headline figure not capturing certain key features is mentioned as nauseum on CNBC a or any decent financial news source.
Gallup and the person who posted this is trying to make it sound like a revelation. Further almost all types of employment has improved.
Here in the UK we have a similar obfuscation technique where the opposition says more women are out of work than ever, whereas the government says more women are in work than ever. Both are true, but behind the scenes it is because there is the largest population of work aged women ever.
If you're getting unemployment benefit but do some undeclared job, you are employed but count as unemployed.
If you're not looking for a job, it's fair to not be counted as unemployed. Otherwise you can also count any kid in age of working in the statistics or family who have decided to have one member employed and the other taking care of the family.
The writer (CEO of gallup) pretty much explains that the stats behind the title is not what HE thinks it is.
This statistic describes those who want to work and cannot find a job.
> None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job -- if you are so hopelessly out of work that you've stopped looking over the past four weeks -- the Department of Labor doesn't count you as unemployed
Even the local news gives this disclaimer almost every time they mention the unemployment rate. Maybe it's not that nobody tells you, but that the author just didn't notice it.
Before the 2008 financial crisis 1 of 8 american children where on food stamps. 2015 1 of 5 children are on food stamps. In short this is bad. I bet banker bonuses have went in the totally opposite direction, ie up since the financial crisis.
It is far from being perfect metrics, I agree. However, it is a good way to compare unemployment fluctuation over time as long as we keep the same paramaters over time.
The sum of their "% Payroll to population", "% Underemployed", and "% Unemployed" appears to be about 70%. If they're disjoint categories, what is the other 30%?
I don't get this argument. Let's put aside that the author seems to be unaware that the BLS puts out multiple unemployment statistics. It seems to me that what really matters is not what statistic is being used but rather that the statistic being used is consistent from year to year so we can see what the trend in employment is.
If we counted Spanish unemployment like that it would surely not be the same rate as it is today, 23.7%. This definitely includes people that has given up hope about finding a job.
On the other hand, it doesn't include those who are working without a legal contract, which I am sure would lower the percentage significantly since it's not uncommon.
Except one shouldn't see it as bleak, they should see it as reality.
I imagine even the given 30 million number is grossly below what reality is. If you only consider people who have careers, who are not wage slaves in menial labor, who are not ultra-rich who don't work actual hours, who are not retired, who are not disabled, or are not off the grid, who are not children, who are not homemakers, etc you would probably only have 40 - 60 million people working what many consider what a "job" is supposed to be.
The other 200+ million are all either working dirt wages in economically compelled indentured servitude, are taking behind the scenes cash deals to survive off, are living with family, etc. There is just not that much practically productive work to be done right now where someone is willing to pay someone else to do it.
The problem here is that it wouldn't necessarily be bleak.
Housewives by choice, college kids and those just retired at 35 (or 65) are good things - these people are doing what they most want to do with their lives, and are having all their needs met without a job.
However, as we haven't been collecting this data for the last hundred years we don't know what's normal for this number. And we don't know what percentage of the population are these "good unemployed" and what percentage of people are the traditional (bad) unemployed, so our guesses suck as well.
I think this number should be released, but I don't think it will do much good for the first decade or 2.
--
Addendum- after seeing maxericson's comment, I was reminded that I should not comment on things I don't know in depth. And it does seem like the U.S. does report the number of employed, it's just not what the press tracks. However, oddly, the numbers he links to seem to mainly be predicated on the same definition of unemployment, and do not seem to dive deeply into the category of "neither employed nor unemployed." Anyhow I'll leave my comment for the time being.
I expect the other tables there contain the information to get some answer to your "neither employed nor unemployed", several of them analyze the workforce. For instance:
This is how it's in Europe as well: unemployment rates can be redefined to include or exclude certain people depending on what are the desired results. I usually look at employment rates instead which comes with its own peculiarities.
>unemployment rates can be redefined to include or exclude certain people depending on what are the desired results
The metrics aren't redefined, nor are there "desired results". There are a variety of unemployment measures at the BLS, and the information on how each are calculated is freely available. Why assume conspiracy?
I always thought that the great lie in the employment statistics was due to high percentage of the American population that is in jail. USA has the greatest number of prisoners of the developed countries, and it skews the statistics.
It cannot be a very great lie, because the incarceration rate is <1 %, and unemployment is generally an order of magnitude larger. And: incarceration rate includes also people who are not in in the potential workforce (i.e. are not working age).
The author is not a dummy. He is CEO of a top tier polling organization. Surely he understands U3 and U6, etc. He may have partisan leanings to the extent that this can be taken as a criticism of the current administration. Current policies may not be helping but I'm not sure that any partisan solutions provide the answers needed.
The bigger picture here is that the US sacrificed some broad-based increase in prosperity over the last 20+ years while helping the developing world to climb out of true poverty. You cannot bring 1 billion Chinese (and to a lesser extent other peoples) into the "middle class" through trade while at the same time sustaining the exceptionally high standard of living of so many Americans -- at least not without some major, hopefully-temporary dislocations.
At the same time, somewhat related to this, we are witnessing the passing of a period in which America enjoyed unique competitive advantages which are unlikely to re-occur in a similar form. No amount of IT innovation can make up for the passing of peak-US-cheap-oil-production (1970s), or the loss or diminishing of the dollar's reserve status and the US's central role in global trade (ongoing), or the temporary advantage of economic competitors being crushed in WWII (50's and 60's)...
The Americans worst affected by these policies were bought off to some extent with cheap imported consumer goods (think Walmart), oodles of credit, the spread of two income households and of course benefit programs.
Now, if you were to try to address this problem sincerely from a position that jobs and employment are desirable social goods you wish to maximize, you might aim for sensible policies that would reduce the cost of living for typical Americans (allowing them to attain desirable, economically justifiable employment at globally competitive wages), increase labor mobility (ability to move for opportunity), and reduce the barriers to employment at the bottom of the employment ladder. Secondary policy objectives might include simplifying the tax system, encouraging household formation, and restructuring education so that expensive college degrees are less necessary.
A lot of this has to do with how people are living in what kind of housing, how that housing is financed and what kind of transport they use to get to work and what kind of shape they are in mentally, physically and perhaps even spiritually to be be productive. I think major changes are needed to achieve broad-based 21st century prosperity growth in the US. Some of these changes would be deeply unpalatable and will only be considered if economic conditions worsen substantially.
Some here seem to think we are entering a post-employment society where jobs will be increasingly scarce because they are not needed and that this is a good thing. Maybe it is, maybe it isn't. This kind of thing is the hallmark of privileged bubble thinking. If you really remove the dignity of work from so many, you run the risk of making the people themselves seem redundant.
Deficit is dropping like a stone, but republicans aren't looking to bring back government jobs, they are just looking to use the flavor of the day to make people afraid of the Obama administration.
It's part of the Republican platform when a Democrat president is in office, but it seems Republican presidents don't get the message. Deficits rose under every Republican president and dropped under every Democratic president, since the 1950s. But republicans always act as if it's the other way around.
Bush's administration for example financed: medicare overhaul, no child left behind, two wars overseas, and bank bailouts. The way they did the spending had little oversight and the results were mediocre, or negative. Under Obama's admin at least there was "recovery.org - track the money" and more accountability.
If republicans really want to cut government spending and deficits they should look into cutting the military budget. Not only does has it ballooned to take up nearly half of all non discretionary income, but apparently $7 TRILLION is unaccounted for. So until they do that, I don't consider their "platform" anything but a talking point to bring up ONLY against Democratic presidents. (In some way, it's good because it keeps them in check, but then republican presidents get a free ride from them.)
Right-leaning Gallup of course "forgets" to note that baby boomers retiring is making a material contribution. Also that the recession gave employers a good opportunity to automate workers out.
