Tags: Alternate Index Shows Unemployment Far Worse Than Reported

Alternate Index Shows Unemployment Far Worse Than Reported

By    |   Thursday, 11 Aug 2011 12:21 PM

An alternate ratio used by economists shows that unemployment is far worse than reported.

The employment-to-population rate, which economists say is a more accurate measurement for employment, was 58.1 percent last month, the lowest since 1983.

The employment-to-population rate, or "e-pop," has been falling because many people are giving up looking for work, a CNNMoney article reports.

Discouraged job seekers are falling out of the work force and not being counted in the unemployment rate, which was 9.1 percent in July.

Other factors are retiring baby boomers and younger people staying in school longer, but discouraged workers account for most of the e-pop increase.

The e-pop, which fell from 58.9 percent from last year, is a better employment yardstick than the unemployment rate, economists say.

"What you see is from '07 to '09 — it fell off a cliff, and it hasn't recovered since then," Heidi Shierholz, an economist at the Employment Policy Institute, told CNNMoney.

According to the Labor Department, 6.6 million people want a job but have left the work force for different reasons. That number is the highest in 17 years and an increase of 1.9 million since the recession began, according to CNNMoney.

Government support programs, such as disability and unemployment insurance, mask the true unemployment picture. The jobless apply for jobs to collect unemployment insurance but stop looking and fall off the rolls when their benefits end. Workers with health problems may keep working when they have a job, but may collect disability when the economy is bad.

"The smaller the fraction of the population that is working, the harder it becomes to put the country’s fiscal affairs in order," writes economist Ed Dolan in his EconoMonitor blog.

"A cuts-only fiscal consolidation strategy with a cap of 18 percent on federal expenditures will not mean a return to the good old days of the 1950s and 1960s."

In addition to spending cuts, Dolan advocates tax reform and closing tax loopholes and exemptions, like the like the mortgage interest deduction, employer-paid health benefits, and charitable contributions to increase revenues, but reducing marginal tax rates.

"There should also be a shift from taxes that disincentivize work toward taxes on consumption, like a higher gasoline tax or a value-added tax."

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An alternate ratio used by economists shows that unemployment is far worse than reported. The employment-to-population rate, which economists say is a more accurate measurement for employment, was 58.1 percent last month, the lowest since 1983. The...
Alternate Index Shows Unemployment Far Worse Than Reported
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2011-21-11
Thursday, 11 Aug 2011 12:21 PM
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