Overview
This lecture examines the limitations of the official US unemployment rate and introduces the "True Rate of Unemployment" (TRU) by the Ludwig Institute for Shared Economic Prosperity (LISEP), highlighting broader issues of underemployment and inadequate wages.
Official vs. "True" Unemployment Rates
- The US Bureau of Labor Statistics (BLS) reported a 4.2% unemployment rate in April.
- The "True Rate of Unemployment" (TRU) calculated by LISEP was 24.3% for the same period.
- Over half (52.4%) of the US adult population is "functionally unemployed" by TRU standards.
Definitions and Methodologies
- BLS counts anyone working at least one hour in the reference week as employed, regardless of income.
- LISEP defines "fully employed" as working 35+ hours/week or working part-time willingly, earning at least $25,000 annually.
- Those earning less than $25,000/year or involuntarily working part-time are considered functionally unemployed by LISEP.
- TRU also considers informal (under-the-table) work, but this has little impact on the overall rate.
About LISEP and Its Metrics
- LISEP is a nonprofit founded in 2019 to produce alternative economic metrics for low and middle-income Americans.
- Their other metrics include the True Living Cost (TLC) and Minimum Quality of Life (MQL) indices.
- LISEP's methodology is seen as both a credible supplement and a subject of controversy.
Disparities Highlighted by TRU
- Racial disparities: Black (26.7%), Hispanic (28.2%), White (23%) functional unemployment rates.
- Gender disparities: Women (28.6%), Men (20%) functionally unemployed.
- Education disparities: No high school (50.7%), high school/some college (28%), Bachelor's (16%), Advanced degree (13.1%).
Policy Implications
- Official rates may misguide policy by ignoring underemployment and low wages.
- Policies based on official rates risk underinvesting in workforce development, housing, and childcare.
- Richer metrics like TRU could prompt policies supporting higher wages and better social safety nets.
Key Terms & Definitions
- Unemployment Rate (BLS) — Percentage of the labor force not working but actively seeking jobs, as defined by the Bureau of Labor Statistics.
- True Rate of Unemployment (TRU) — LISEP's broader measure including underemployment and those earning <$25,000/year.
- Functionally Unemployed — Individuals not earning a sustainable wage ($25,000/year) or involuntarily in part-time work.
- Informal Economy — Off-the-books work not captured in official employment data.
Action Items / Next Steps
- Reflect on whether the official unemployment rate matches your community's experience.
- Consider the value of alternative economic metrics in policy discussions.
- Be prepared to discuss the implications of underemployment and low wages in future classes.