Something to Consider as You Read the News...

When we read the newspaper, many people check out the unemployment rate to get a sense of what is happening in the economy. However, the reliability of the unemployment data is coming into question—how well do unemployment statistics depict the health of the labor market and economy? How healthy is our economy actually? The use of unemployment statistics as an indicator of economic health has been challenged before because it does not capture individuals who exit the labor force. Recent discussions of underemployment and persistent levels of involuntary employment have also begun to challenge the significance of the unemployment rate as a self-standing indicator. An alternate unemployment statistic, known as U6 unemployment statistics, include discouraged workers and involuntary part-time workers. In August, while the standard unemployment rate was 6.2, the U6 unemployment rate was 12.2, illustrating a higher need. This blog post will explore an indicator of the health of the economy that is not captured by unemployment statistics: involuntary part-time employment. Involuntary part-time employment, or part-time employment for economic reasons, is defined part-time employment (working 1-34 hours per week) as a result of the state of the economy. This includes workers who were only able to find part-time jobs and workers who were full time but had their hours cut back below 35 hours per week. This is important because the level of your employment influences your capacity to earn a significant income and participate in your society, similar to the importance of workers’ wages.

Recognizing Underemployment

In “Part-Time Workers a Full-Time Headache on Yellen Radar: Economy,” the author highlights a portion of Federal Reserve Chairs Janet Yellen’s speech in which she states “the unemployment rate is down, but not included in that rate are more than 7 million people who are working part time but want a full job. As a share of the workforce, that number is very high historically.”

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Figure 1: “Employment Level- Part-Time for Economic Reasons, All Industries,” Current Population Survey, Bureau of Labor Statistics (The unit of measurement is thousands of people. For example 7,000 thousands people or 7,000,000 people.)

Figure 1 is inclusive of employed individuals age 16 or over working 1-34 hours a week (part-time) for economic reasons, or involuntarily. The unit of measurement is thousands of people. As illustrated in the graph, the number of involuntary part-time workers increased by a large amount following the Great Recession. There has been a downward trend in the number of involuntary part-time workers. However, it has not reached the pre-recession levels. As of August 2014, there were 7,277,000 involuntary part-time workers in the United States.

In Valletta and Bengali's "What's Behind the Increase in Part-Time Work?" the authors dissect potential reasons part-time work follows cyclical economic changes. They illustrate that, while part-time employment for non-economic reasons has been on a general downwards trend, part-time employment for economic reasons rise during economic hardship and fall when the economy recovery. Breaking down part-time employment for economic reasons, slack work/cutting back workers hours has a greater role in the high level of involuntary part-time employment levels than only being able to find part-time work.

The Opportunity to Earn a Living

In Ylan Mui’s “More Americans are stuck in part-time work,” Carrie Gleason is quoted highlighting the fact that “low-quality part-time jobs” prevent people from “productively engage[ing] in their lives or in the economy.” While this article highlights some of the action taken by workers within the community demanding a better treatment, such as more reliable work schedules, this article also highlights that individuals affected by long term unemployment have little power to negotiate the terms and conditions of their employment. One 65 year old woman was unemployed for 10 years before she was offered a part-time job at Wal-Mart making $9.55 an hour. She was quoted stating “I gotta take what I can get.” In Geewax’s “As Labor Market Advances, Millions are Stuck in Part Time Jobs,” Peter Morci is quoted stating that “businesses can hire desirable part-time workers to supplement a core of permanent, full-time employees, but at lower wages.” This suggests economic conditions have fostered a potentially exploitative power dynamic in the labor market.

The following tables from Zach Bethune’s “Slack in the Labor Market: Who are the involuntary part-time workers and what are their outcomes?” utilize data from the Current Population Survey to illustrate the transition rates from a part-time job for economic reasons to a full time job or to unemployment. The transition from part-time for economic reasons to full time is “the fraction of all workers who were working part-time for economic reasons a year ago, that reported working full-time in the current period.” Bethune labels defines the normal transition rate as 45%. Yet since the recession, the transition rate has stayed around 38%.

rate-pter-fter-2014-07-18Figure 2: “Transition Rate from Part-time for Economic Reasons to Full-time”

Figure 3 illustrates the transition from part-time for economic reasons to unemployment. Bethune highlights the current transition rate as a more positive signal because the transition rate has returned near pre-recessions levels, which is approximately 6%.

rate-pter-unmp-2014-07-18 Figure 3: “Transition Rate from Part-time for Economic Reasons to Unemployment”

While the decline in the transition from part-time to unemployed is a positive indication of the health of the labor market, the low transition from part-time for economic reasons to full time could suggest barriers to earning a sufficient income.

Florida Underemployment

Table 16 of the Geographic Profile of Employment and Unemployment present the number of part-time workers by state. This table presents the data of part time workers who could only find part-time work, excluding explicit data on the number of full-time workers working part-time for economic reasons. In 2012, there were 1,496,000 part-time workers in Florida. 468,000 were part-time workers for economic reasons. This number is not a complete depiction of involuntary part-time employment. It only illustrates people who could only find part-time work. 710,000 that were unemployed were searching for full-time work.

How is the underemployment rate in Sarasota County? How many people in Sarasota County are trying to improve their well-being through earning a sufficient living, but cannot find sufficient work? Something to consider when pondering the well-being of members of our community as you read the local news…