Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 19, 1992 TAG: 9201170082
SECTION: BUSINESS PAGE: C-1 EDITION: METRO
SOURCE: By LOUIS UCHITELLE
DATELINE: LENGTH: Long
OFFICIAL STATISTICS NO LONGER GAUGE WHO'S OUT OF WORK
The unemployment rate in America is officially 7.1 percent. But economists now are saying that figure considerably underestimates the real number.They warn that the unemployment figure, influential in gauging the nation's economic health and determining what policies should be adopted to improve it, provides a false sense of the economy's strength and its potential for rebounding.
The problem: changes in the work force over the past 15 years that are not accounted for in calculating the rate.
One such change is the growing number of people on the edge of unemployment, counted as working but facing the hardships and insecurity of the jobless. These people, probably numbering more than 3 million, include many temporary and free-lance workers, older men pushed into lower-paying jobs, consultants and single mothers who cannot work as many hours as they would like.
Workers such as these often have no company-sponsored health insurance - or even assurance from one day to the next that they will have a job.
People in such a predicament, though listed as employed, often behave as if they are not. They are afraid to buy a new home and hesitant to spend money on a new car, gifts or even dinner out and an evening at the movies.
The other important and growing category not captured by traditional employment data is an unknown number of people, perhaps more than a million, who have given up looking for a job or even admitting that they would like one. These include teen-agers, former factory workers and an unknown number of people unwilling to seek jobs that pay less than about $7 an hour.
The monthly employment statistics cover only people who have work or say they are actively hunting for it.
"It is quite clear that our employment statistics no longer fully explain what is going on out there," said Thomas Plewes, associate commissioner of the Labor Department's Bureau of Labor Statistics. That agency gathers the monthly employment data.
Only lately have policy makers begun to agree, recognizing as the recession drags on that a 7.1 percent unemployment rate - mild by the standards of past recessions such as the 10.8 percent during the 1981-82 recession - may be a misleading indicator of the economy's problems.
Just last month, the Bush administration - which had been forecasting a recovery by Christmas - acknowledged that Americans were suffering more hardship than the official data indicated, and that the recession that began 18 months ago still gripped the nation.
Alan Greenspan, chairman of the Federal Reserve Board, took note of the shortcomings in the employment numbers during recent congressional testimony. "Don't look at these data and say that everyone is in good shape," he said in reply to a question, "because clearly they are not."
The Bureau of Labor Statistics derives the nation's unemployment rate from a monthly Census Bureau survey of 65,000 representative American households. The department bases its unemployment rate on those who report, in effect, that they did not work during the week before the survey, but did hunt actively for a job.
But an examination of Labor Department data and interviews with labor economists suggest that the November 6.8 percent jobless number, for example, would translate as more than 12 million people. That also would be nearly 10 percent of the labor force, if the definition of joblessness was broadened to include those who wanted jobs but were not job hunting and those who held jobs but nevertheless suffered the concerns usually associated with unemployment.
The Labor Department is beginning to consider changes that might broaden the concept of who is considered unemployed, although Plewes cautioned that gathering the additional information needed to make the rate more accurate would require more questions about Americans' behavior that might violate their privacy.
"More penetrating questions in the monthly employment surveys would yield different answers," said John Dunlop, a Harvard labor economist and secretary of labor in the Ford administration.
That is evident from the way in which the bureau classifies the employed. The statistics, for example, listed 116.8 million people as holding jobs in November; that is, they met the bureau's criteria of having worked for pay in the week before the survey.
Such a blanket classification fails to capture the experiences of the proliferating number of Americans who work and draw pay but are carried on corporate rolls as free-lancers, contract workers, consultants or temporaries.
Most of these people presumably show up in a subcategory of 12 million jobholders whom the bureau describes as temporary workers or self-employed.
It is a substantial subcategory, one that has risen to 10 percent of the labor force from 8 percent in 1980. It covers the owner of a prosperous store or law firm. But the subcategory also covers the more precariously employed: the consultant, the free-lancer, or the contract worker who hires out day-to-day as a clerk, an engineer or a gardener.
"There are probably more than 5 million free-lancers and temps," said Mitchell Fromstein, chairman of Manpower Inc., which recruits and supplies such people at an hourly fee. "All the major corporations have them in what they call a supplemental work force," he said. "And the practice is growing."
Some free-lancers prefer to work this way. But Fromstein said the majority wanted regular jobs and took temporary work because they could not get permanent employment. Among those who sign on with Manpower, one-third acknowledge on their applications that they are hunting for a permanent job.
Then there is the phenomenon of the part-time worker. Again, the Labor Department groups some jobholders as "part-timers for economic reasons" - people who tell the surveyors they would like to work full time, but can get only part-time hours. Their numbers jumped to 6.5 million last month, 5.2 percent of the work force, from 5 million in July 1990 at the start of the recession.
Clearly, these part-timers suffer from partial unemployment, many economists say, and the Labor Department agrees, although this circumstance is not reflected in the national unemployment rate.
Neither is the hidden unemployment that exists among the 14.9 million people who were listed by the Bureau of Labor Statistics in November as working part time voluntarily. Most in fact do not want more hours. But while this group has not changed over the years as a percentage of the labor force (roughly 12 percent), the composition may have shifted to include more people who, in easier circumstances, would have sought full-time work.
Specifically, economists point to an unknown number of single mothers who tell the surveyors that they work part time and prefer it that way, but in fact need more money and would work more hours if they could afford child care.
A decade ago, the Labor Department's definitions of employment and unemployment worked much better. Then, layoffs occurred en masse among blue-collar workers in manufacturing whose union affiliations, benefits and wages of more than $12 an hour gave them a strong attachment to the work force.
During the 1981-82 recession, 2.3 million such jobs disappeared, and the people who held them joined the ranks of the unemployed as they sought work to replace their middle-class wages - or waited to be recalled.
The current recession also features blue-collar job losses: 824,000 in the first 16 months. But whereas a decade ago job losses among white-collar workers in retailing, insurance, banking and real estate were virtually nil, 570,000 such jobs have disappeared in the first 16 months of this recession.
These are the white-collar equivalent of factory workers - sales clerks, computer operators, restaurant workers, office personnel. They are more likely than factory workers to slide from full-time to part-time work, or to leave the labor force altogether, and therefore not be counted as unemployed.
"If you are a sales clerk earning $7.12 an hour, which is the average in the retail industry today, you are not as attached to the labor force as an auto worker or a steelworker who is still earning more than $15 an hour on average," Plewes said. "With less at stake, you are more likely to drop out and stay home, or avoid layoff by agreeing to work fewer hours, a common practice in retailing."