Editor’s note: This is the second of two columns on the unemployment rate. The first column is Numb to jobless numbers.
We may or may not be in a recession as economists define it, but the economy certainly is far from vigorous. With few exceptions, unemployment rates continue to rise for the nation as a whole, as well as for Minnesota and the Twin Cities area.
The unemployment rate varies with the business cycle, falling in booms and rising in busts. But other, longer-term societal changes can also affect it. This is particularly important to keep in mind when comparing unemployment between widely separated years.
Take, for example, the effect of military service. In the 1950s and 1960s, more than 2 million people served in the armed forces at any given time, even though our population was 80 million to 100 million lower than it is at present. Now a little more than 1 million serve in the military.
Military personnel are excluded from the unemployment rate tabulations at the start. Moving to a much smaller, all-volunteer military means that many people in their late teens and early 20s — who would have been in service 30 years ago — are now in the labor force and many are unemployed.
A reverse phenomenon resulted from a more recent move toward harsher penalties for crime, especially drug-related offenses. We put a much higher proportion of our population in jail than any other industrialized nation and we quadrupled the number of prison inmates between 1980 and 2000. This again takes many young men out of the entire equation.
We tend to smirk at Europe’s high unemployment rates, but European economists correctly reply that if we added the legions of people in U.S. prisons to our unemployment rolls, the gap would be much narrower.
The disabled are also out of the labor force. In European nations with broad social programs, this has long been a way to absorb redundant middle-age people without their appearing in the unemployment statistics. Some reports note that in The Netherlands as much as 40 percent of people in their 50s are on disability — many for reasons as amorphous as “job stress.”
U.S. labor economists snickered about this, but the phenomenon is catching on here. The number of people receiving disability benefits under Social Security doubled to 5.4 million between 1990 and 2000. Such disability benefits now cost the Treasury much more than food stamps or unemployment compensation.
In fairness, as the baby boom generation ages, the proportion of the population in the age brackets in which genuine disabilities are likely to show up is increasing much faster than the population as a whole. So, not everyone is malingering.
Changes in the way we treat mental illness also have affected labor force and unemployment numbers. People in mental institutions are separated from the calculations right at the start. When we pushed many people out of state mental hospitals in the 1960s and 1970s, they moved into the population that is counted by the U.S. Bureau of Labor Statistics.
Most ended up “out of the labor force” and that lowered labor force participation rates relative to where they would be if we still institutionalized as many people we did in 1960. Some discharged patients do work or look for work. Many have a harder time holding jobs than the general population and that has bumped the unemployment rate up at least marginally.
Higher tuition rates, even at state institutions, combined with less generous financial aid means that a higher proportion of students work while attending college. I teach at both state and private colleges and it is rare to find a student who does not hold down a job.
This change means that labor force participation rates and employment numbers are higher for 18- to 25-year-olds than they were 32 years ago —when I and many others received $375 a month from the G.I. Bill and paid $112 per quarter in tuition and fees, including health coverage.
© 2002 Edward Lotterman
Chanarambie Consulting, Inc.