Measures of Labor Underutilization from the Current Population Survey Steven E. Haugen Office of Employment and Unemployment Statistics Presented by: Lucy P. Eldridge 18th International Conference of Labour Statisticians December 4, 2008 BLS U.S. Bureau of Labor Statistics www.bls.gov

Unemployment Key indicator of labor market performance Objective definition not working available for work have actively searched for work

Occasional Criticism of the Official Unemployment Concept Too broadly defined Too narrowly defined Job search requirement too stringent Should capture the underemployed Should be a measure of hardship Quality of jobs not captured

U.S. Unemployment Rate Data collected in Current Population Survey (CPS) – monthly survey of approximately 60,000 households Unemployed as a percent of the civilian labor force CPS methods and concepts can be found at: http://www.bls.gov/cps/cps_htgm.htm

Background on Alternative Concepts In 1976, under the direction of Commissioner Julius Shiskin, BLS developed a range of unemployment indicators (U-1 through U-7) Motivation: no single measure can satisfy all analytical or ideological interests Rates oriented from lowest to highest, implicitly associated with larger groups of people experiencing economic hardship

Background on Alternative Concepts 1994 Major redesign of the Current Population Survey (CPS) affected inputs in several of the U-1—U-7 measures http://www.bls.gov/opub/mlr/1993/09/contents.htm Publication discontinued in late 1993 In October 1995 BLS introduced U-1— U-6 Regular publication of the new set of indicators began in February 1996

Alternative Definitions of Unemployment U-1 (most restrictive): only persons unemployed for at least 15 weeks U-2: only persons unemployed as a result of job loss U-3 (official measure): persons not employed, actively seeking work, and available to work

Alternative Definitions of Unemployment U-4: unemployed plus discouraged workers - those who have given up the search for work because they feel no jobs are available U-5: unemployed plus all marginally attached workers - those who have given up the search for work for any reason U-6 (broadest measure): unemployed, marginally attached plus persons employed part time for economic reasons U-4 and U-5 both add selected not-in-labor-force categories (that is, groups of persons neither employed nor unemployed) to the unemployed U-4 adds in discouraged workers. (persons neither working nor currently looking for work who indicate that they want work, but have given up searching because they feel no jobs are available for them.- requires prior job search and current availability to work) rate is as a percent of civilian labor force plus discouraged workers EXTRA INFO: The number of discouraged workers was much smaller after the 1994 redesign because the definition for the group was tightened to include only those with a recent job search. , prior desire to work and job market-related reason for not looking was sufficient ; considered too subjective. New 1994 questions cut # discouraged in 1/2 U-5 added all marginally attached workers Marginally attached workers are those who want a job and are available to work now, and have looked for a job in the past year--but not in the past month--for a wide range of reasons that extend beyond discouragement over job prospects. (such as transportation problems or child care needs) rate as a percent of civilian labor force plus discouraged and other marginally attached The uppermost indicator in the range, U-6, unemployed, discouraged workers, marginally attached for other reasons, as well as all persons employed part time for economic reasons - those who want and are available for full-time work but have had to settle for a part-time schedule. . Including a group of employed persons is a large conceptual break from the other measures, but since many would agree that these persons are visibly underemployed, those who want to treat the underemployed on an equal basis with the unemployed may find this alternative measure useful.

Alternative measures of labor underutilization: U1-U6 (2007 annual average; in percent) Source: U.S. Bureau of Labor Statistics, Current Population Survey

Cyclical Analysis U-1— U-6 have followed a nearly identical track since 1994 In terms of cyclical analysis there appears to be little advantage to any one of the alternative measures

Alternative Measures of Labor Underutilization: U1-U6 (seasonally adjusted 1994-2008; in percent) Source: Bureau of Labor Statistics, Current Population Survey Note: Data are monthly, shaded area denotes recession.

International Comparisons BLS does not prepared international comparisons on the U-1 to U-6 basis Discouraged workers are not defined for most countries according to the current U.S. definition One exception is Japan, where a researcher was able to prepare comparable estimates of U-4 to U-6.

Conclusion Alternative measures of unemployment can meet different needs Cyclical trends among alternatives are very similar The official unemployment rate still is viewed by many to be the most objective, best overall cyclical indicator of labor underutilization.

Contact Information Steven E. Haugen haugen.steven@bls.gov Office of Employment and Unemployment Statistics http://www.bls.gov/news.release/empsit.t12.htm http://www.bls.gov/opub/ils/pdf/opbils67.pdf http://www.bls.gov/cps/cps_htgm.htm Lucy P. Eldridge eldridge.lucy@bls.gov Office of Productivity and Technology BLS U.S. Bureau of Labor Statistics www.bls.gov

Alternative measures of labor underutilization: U1-U6 (in percent) EXTRA INFO IF ASKED: Current 2008 data for October; difference between the U’s basically the same Source: U.S. Bureau of Labor Statistics, Current Population Survey

LABOR FORCE AND UNEMPLOYMENT CONCEPT DIFFERENCES U.S. Current Population Survey International Labor Office Guidelines Labor Force Civilians only Total (incl. military personnel) Unpaid Family Workers in Labor Force Excludes those working fewer than 15 hours per week Includes all unpaid family workers Unemployment Status of Persons on layoff All with a recall date, or who expect to be recalled within 6 months Only those with a weak attachment to their job (and with no recall date) Persons waiting to begin a new job Must be searching for work Do not have to be searching for work http://www.bls.gov/opub/mlr/2000/06/art1full.pdf