| The survey system used to collect unemployment data relies
on a precise definition of unemployment, which may not capture what we
are interested in, and a precise wording of the questions asked of the
respondent, which may also not lead us to the measure of prime interest. |
| How is the official definition of unemployment misleading
about unemployment? |
| The unemployment rate is defined as number of people
that do not have a job but are actively seeking one, divided by the sum
of these people and those who have jobs. Thus, the unemployment rate, by
definition, excludes people without jobs but not actively seeking one.
This would be fine if it only excluded people who do not want to work.
It is misleading because it excludes people who would take a job if one
were offered, but are not looking either because the prospects for success
have become so slim or they have run out of resources to conduct a search. |
| How is the method used to collect unemployment data
misleading about unemployment? |
| The precise question asked is whether the respondent
worked for at least an hour during the previous week. If the answer is
yes, the respondent is counted as employed. If the answer is no, he or
she is counted as unemployed. A person who worked 2 hours but was looking
for a 40-hours a week job is counted as employed. She is really underemployed,
and this fact would be valuable to know. |