The happenings "inside" the Wisconsin State Treasury and across the street at the State Capitol

Posts tagged “Employment

The Economy & You #39: Who’s Been Working?

I recently came across a very interesting visual blog from General Electric (GE) that provides a visual representation of who has been working in the U.S. over the last 50 years. Users are able to visually track how many people have been working by age, gender, or business sector from 1960 to 2011.

The Economy & You #23: How Technology Affects Employment

When the Industrial Revolution first began in England in the 19th century, a group of people feared that new technology (the mechanized loom) would take away their jobs and their way of life.  The mechanized loom allowed for textiles to be made by cheaper and relatively unskilled labor, which would result in artisans who currently made the fabrics to lose their jobs.  This group, the Luddites, responded to this threat by destroying these machines.

An article by David Talbot in Technology Review outlines how technology is reducing the need for certain jobs faster than new jobs are being created. Our society has continued to witness this process of the elimination of jobs due to technology and innovation while at the same time creating new kinds of work that result in more productivity and higher prosperity, all with little effect on employment.

With the U.S. facing an unemployment rate that is still over 8 percent, and people struggling to find work, many are wondering what role technology plays in all this.  There are several factors that explain changes in the labor market including outsourcing, but according to the Talbot article, automation and technology may be playing the biggest role.

Research indicates that improvements in workplace automation are being utilized at a faster and faster rate which makes it even more difficult for workers to adapt.  More and more jobs that were once handled by a front-line worker are now being accomplished by a machine or software program.  The welding and painting of automobiles are now performed by robots. Complex calculations by engineers and accountants are now being done through software programs.  More and more work is being done by machines.  This has caused worker productivity to continue to rise steadily even with the economic downturn.  The improvement in productivity means that fewer workers are needed to complete a specific task.

This progression can be seen throughout multiple industries.  We are very familiar with the mechanization of agriculture that transformed our society.  In 1800, 90% of Americans were employed in agriculture. In 1900 that number was 41% and today that number is 2%. Still, there are other examples: ATMs have replaced bank tellers, online shopping (EBay and Amazon) has replaced retail sales clerks, and customer support can be done solely through the phone without speaking to a live person.

Because of this automation and advancement, some researchers believe that jobs prospects are disappearing from the middle and migrating to the two ends of the wage spectrum.  Those who have few of the needed modern day skills will only find work in the lower wage positions.  Those in the higher wage bracket will possess professional or technical expertise.  For production workers, sales reps and those in typical middle class jobs, those positions will see slow growth or even a reduction in the labor market because these jobs are the easiest to replace, fully or in part, by technology. The result is that technological advancements are eliminating jobs faster than they can be replaced by new industries.  So unless the economy generates new high-quality jobs, the people in the middle will face the prospect of low-skill, menial job whose wages will actually decline as more people compete for them. In the short run, the old set of skills that once created a lot of value is not useful anymore.

Like the Luddites, we cannot destroy the advances in technology that threaten our present day jobs. Therefore, governments (local, state and federal) need to invest substantially in human capital.  The problem we face is that a large segment of our labor force is not adequately educated in new technologies that will allow us to take advantage of these advances and develop the new and undiscovered industries that will employ our nation’s workers and help sustain our way of life.

The Economy and You #4 – Who are the Unemployed?

Previously, I wrote about how the unemployment rate is calculated and whether it is an accurate measure of the health of our economy.  Did you know that there are a number of ways to determine how many people are “unemployed?”

In my last article, I explained that the Household Survey conducted by the Bureau of Labor Statistics places all adults into three categories: 1) employed; 2) unemployed; and 3) not in the labor force.  The Bureau of Labor Statistics also calculates several measures of labor underutilization or unemployment.

The first rate (U-1) measures only those persons considered to be long-term unemployed.  U-1 Is defined as persons unemployed for 15 weeks or longer, as a percent of the civilian labor force. Using data from November 2008, the U-1 rate was 2.6%.  With each successive rate, additional people are included in the calculation.

For the U-2 rate, the calculation includes job losers and persons who have completed temporary jobs, as a percent of the civilian labor force, but excludes people who leave their job.  The U-2 rate was 3.9%.

The official unemployment rate or U-3 is defined as the total amount of unemployed persons as determined through the household survey.  The U-3 rate in November 2008 was 6.7%. This is the unemployment rate you hear or read about in the news.

The U-4 rate calculation includes the total unemployed, plus discouraged workers, as a percent of the civilian labor force plus all discouraged workers.  Discouraged Workers are persons who have given a job-market related reason for not currently looking for work.  The U-4 rate therefore is greater than the official unemployment rate with the addition of discouraged workers, who from the household survey would be classified as not in the workforce.  The U-4 rate was 7.0%.

U-5 includes total unemployed, plus discouraged workers, plus marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers. Marginally Attached Workers are persons, who currently are neither working nor looking for work, but indicate that they want and are available for a job, and have looked for work sometime in the recent past.  Again this increases the total amount of people who want to work but would not be classified as unemployed from the household survey.  The U-5 rate was 7.8% in November 2008.

Finally, the most inclusive unemployment rate or U-6 measures the total number of persons unemployed, plus discouraged workers, plus marginally attached workers, plus persons employed part-time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers. Persons employed part-time for economic reasons are those who want and are available for full-time work but have had to settle for part-time work.  These people would be considered employed even though they want and are able to work full-time.  Including all of the persons who want to work increases the rate significantly to12.5%.

As you can see, economists can point to a variety of statistics when talking about unemployment and labor underutilization.  Because of this, policy decisions regarding unemployment insurance, tax credits for job creation, and other labor initiatives may have little effect on the official unemployment rate, but could have a noticeable effect on the other measures of unemployment.  All in all, government leaders must recognize that the official unemployment rate does not provide a complete picture of the health of our economy.

The Economy and You #3 – The Unemployment Rate

Does the unemployment rate provide an accurate measurement of the health of the state’s economy? 

While economists use a lot of data and statistics to determine the health of our economy, most families look at one statistic – the unemployment rate.  The unemployment rate measures the percentage of people wanting to work but unable to find a job.  Since labor is our economy’s main resource, making sure people have jobs is of great importance to economic policy makers and state and national leaders.

But how does the government calculate the unemployment rate?  Each month the Bureau of Labor Statistics (BLS) uses two surveys to determine employment and unemployment figures.  The monthly Household Survey comes from approximately 62,500 households which provide information on employment broken down by age, sex, race, and other characteristics.  The BLS also surveys around 150,000 businesses to provide data on hours and earnings for various industries. The Current Employment Statistics program provides data from an employer perspective while the Household Survey provides information from the employee perspective.  The BLS collects data from the sources to provide monthly employment data.

The first number needed to calculate the unemployment rate is the size of the labor force. The labor forced is defined as the number of employed adults plus the number of unemployed adults.  The Household Survey places all adults into three categories: 1) Employed: those working as a paid employee, self employed, or unpaid working for a family business; 2) Unemployed: those not employed who are available for work and have been looking for work during the previous four weeks; and 3) Not in the Labor Force: adults who do not fit into the first two categories such as full-time students, homemakers, retirees, and discouraged workers.  Discouraged workers are those who want a job but have given up looking.

So the unemployment rate is considered the number of unemployed divided by the total labor force and multiplied by 100.  For example, according to Department of Workforce Development, in April of 2011, the total workforce in the state ofWisconsinwas 3,044,836 persons and 225,840 of those were unemployed. Therefore the state unemployment rate is 7.4%

But does this provide an accurate measurement of the health of the state’s economy?  Many argue that it does not.  Critics argue that unemployment rates do not address important issues like duration of unemployment, variations in unemployment among demographic groups, variations in unemployment among local regions and industries, and what should be considered as an unemployed person.  These and other issues complicate the interpretation of unemployment data and, in turn, the health of our economy.