Saturday, December 3, 2011
Lies, damned lies, and statistics
Answer: No one knows.
I haven't been paying much attention to the news lately, but one item that has gotten repeated a lot (even on the local classic rock station) is that the latest official national unemployment rate has dipped below 9%. This is viewed as good news, and maybe it is. Then again, maybe it isn't. Have the numbers gone down because fewer people are losing their jobs? More people are returning to work? More people have had their unemployment benefits run out and so are no longer counted as among the unemployed? How about the jobless who never qualified for unemployment compensation to begin with? Did they count when they first lost their jobs, and do they count now? Does anyone know?
This is a question I've thought about for years. At one time the official unemployment rate was determined by doing a phone survey of a random sample of the population: x-number of households would be called and people asked if they were working or looking for work (and, from what I could determine from looking at the Labor Department web site, that's still the methodology used). Didn't matter if you were working less than full-time or if you were working for less money than you wanted or needed, if you collected wages for at least one hour of work per week, you were employed. If you had been unable to find work for so long you'd given up, you were no longer statistically unemployed. You might not have a job, you might wish you had a job, but if you weren't out there pounding the pavement or sending out resumes, you were not unemployed for statistical purposes.
Phone surveys have some obvious flaws. Even back before the proliferation of cell phones, there were always people who did not have a telephone. Any active job seekers who didn't have phones were automatically excluded from the survey data. Given that people without jobs are probably more likely than people with jobs to not have a telephone, how skewed did that make the data? Who knows? And did anyone care?
Another way of talking about unemployment rates is to look at how many people are drawing unemployment compensation at any point in time. If you're unemployed, you're on unemployment, right? Wrong. Depending on the state, as few as 30% of people who lose their jobs actually qualify for unemployment benefits. If your job is seasonal, you might be screwed: back during the Engler administration, the state of Michigan changed its rules to prevent seasonal workers from collecting anything. To draw any benefits in Michigan, you have to have wages earned in more than one quarter of a year during the past 5 quarters and you have to have earned a certain minimum amount in each of those quarters. If you're a minimum wage worker depending on seasonal work (e.g., motel maid in a summer resort town), you may never earn enough money to qualify for unemployment when the inevitable furloughs happen. I had the disconcerting experience once of having worked full-time for almost a full year and then when the job ended in mid-June being told I didn't qualify for unemployment insurance because I had not been working in June the year before. It was bizarre: ten months of full-time employment at a decent wage, and still not eligible for unemployment compensation.
The other way (and probably the most common way) the unemployed find themselves disqualified for unemployment compensation is when their former employer makes a false claim that the employee was fired for cause rather than being furloughed due to lack of work. One of the great myths circulating among the credulous is that if you get fired, you can go on unemployment. Not true. Being terminated for cause (and cause can be very loosely defined) is an automatic disqualification. So is voluntary termination without cause -- i.e., if you quit a job because you don't like it, you can't draw unemployment; if you quit a job for a good reason (your paycheck bounced, for example, or working conditions are unsafe and you can prove it), you might qualify for jobless benefits. I once worked as a power sewing machine operator for a company where the paychecks bounced; several of us quit, we filed for unemployment, the owner* tried to deny the claim, and the unemployment referee ruled that it is a fundamental right of employees to get paid for their work. Of course, that was back in the halcyon days of the Carter administration; I fear the ruling would be different today.
So if the Labor Department's numbers are skewed because of a dubious methodology and the numbers for people drawing unemployment compensation only catch a minority of the actual unemployed, just what is the unemployment rate in the United States? Or, to put it another way, just how much worse is the truth than the sugar-coated information the politicians are giving us? Is there any way to know?
[*To this day, I'm amazed he was able to put down the coke spoon long enough to pay attention to the business for more than a nanosecond. Paychecks bounced because most assets were going up his nose.]