[Promoted by susanhu. Colman is one of the best writers at EuroTrib.com]
Crossposted from EuroTrib : One of our aims is to stand against the cascade of corporate capitalist propaganda that constantly floods over Europe. This article is part of that effort, and might be useful to American progressives when this nonsense comes up.
One of the key complaints levelled against the European social and economic model by corporate capitalists is that it causes high unemployment. The examples chosen are generally France and Germany who are compared against the US.
Before we concede that EU unemployment is substantially higher than in the US we need to examine the numbers cited. Often the official national numbers are used despite the fact that they differ fundamentally on what they measure and how they measure it. Reporting the German rate as 12% and the US rate as 5.1% is either lazy, clueless or dishonest. The official German rate includes people working less than 15 hours a week but who want a full-time job as unemployed while the headline US figures count anyone who works for even one hour a week as employed.
I’m not going to consider the questions surrounding unemployment such as job quality, quality of life or happiness: I’m simply going to ask how legitimate is it to compare the unemployment numbers.
I’m going to use the OECD numbers, which are based on labour force surveys carried out under ILO guidelines. Eurostat, who are responsible for co-ordinating the EU surveys, define unemployment as
Unemployed persons are all persons who were
not employed during the reference week, had actively
sought work during the past four weeks and were ready
to begin working immediately or within two weeks.
The first point to make is that the EU-15 rate from the September 2005 is 8.0% vs. a US rate of 5.1%, which is a rather smaller difference than the comparison normally chosen.
The normal comparison listed is
| Germany | France | US | |
| 2005 Q1 | 9.7% | 9.7% | 5.3% |
| 2005 Q2 | 9.6% | 9.7% | 5.1% |
which appears to prove that the US has a much lower unemployment rate than France or Germany. How comparable are these numbers?
A 2000 paper from the US Bureau of Labour Statistics examined this and noted the following systematic differences between the way the US and other countries implemented the ILO standards for the labour force surveys:
- Passive job seekers were included in EU figures and not in US figures. Passive job seekers have looked in the newspaper for jobs but not taken any other action to find a job.
- People waiting to start a job are included as unemployed in the EU, but not included in the US.
- The period of availability differs: in the US you only count as unemployed if you are available to work within one week. The EU use a two-week window.
Sorrentino concluded that, based on the limited information available, correcting for these differences would have made about a 0.5% difference to many EU figures, especially the French and German numbers. I can find no information on how current figures would be affected.
Among others, two obvious structural issues affect the comparability of the numbers:
- The US has 0.8% of it’s population (not labour force) under arms, while in Germany and France only 0.3% of population serve in the military. The OECD figures are for civilian employment only, so that’s 0.5% extra of the population removed from the labour force. For many young, poor Americans joining the military is one of the few paths to training and work available. If a military career was not available I suspect many of these would end up adding to the unemployment figures.
- The US has 0.7% of the population in jail compared to 0.1% in the European countries. I think it is fair to speculate that most of that 0.6% extra jail population would show up in the unemployment figures.
We could hypothesise that these two factors might add a further 0.75% to the corrected US unemployment number, raising it to around 6.5%-7%.I don’t mean to suggest that people in the military should count as unemployed, simply to point out that there are significant structural differences between the US economy and the EU economies that are often compared to it.
A further complication, and probably both the most profound and most difficult to correct for, is the treatment of “marginally attached workers”:
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 recently.
I believe that the welfare systems in the EU tend to keep people in the official system so that I would expect the numbers of marginally attached workers to be lower * which could raise the unemployment figure substantially.
The OECD figures do not include these people and it seems very hard to correct for. The best I can do is compare German official figures, of 11.5% to the US U-6 figure (which includes the marginally attached and those working part-time for economic reasons) of 10%, which if you adjust as suggested above looks awfully similar. This is, of course, a comparison without any rigourous basis, but it is at least as honest as comparing national headline rates.
As an aside, and has often been said around these parts, the German unemployment figure includes a 20% unemployment rate in ex-East Germany’s and a 7.5% rate in the old West. Germany is still paying the price for re-unification.
Also as an aside, a brief issued earlier in the year by Katharine Bradbury, Senior Economist and Policy Advisor at the Federal Reserve Bank of Boston, caused rather a stir when she suggested that the US unemployment rate could be understated by 1% to 3% on the basis that labour force participation rates had not recovered in the way that they had in previous economic recoveries. Her position was supported by Brad Delong and Paul Krugman. Her detractors argue that labour participation is down through choice and increased affluence. They don’t seem to cite much support for this argument. The strongest criticism, expressed here by James Hamilton is that Bradbury is depending on extrapolating trends, an activity which always carries risks.
In any case, the point of this is to show that even the OECD standardised unemployment rates are not directly comparable, but they do show that while unemployment in the US is probably somewhat lower than in “Old Europe”, the differences are not as significant as often suggested and certainly don’t support the argument that the European social model is much worse than the US model on employment.
Thanks to everyone on European Tribune for their comments on this, especially Jérôme, Afew, Izzy and Wchurcill
Yeah, there’s a lot of these “Europe vs. U.S.” comparisons that seem questionable. I was recently watching Fox News and Fred Barnes was talking about how patients in countries with universal health care have to go on waiting lists to get medical procedures. My wife needed to get an MRI done on her foot here in the good old U.S. of A. and she had to wait forever on a list. Try and see some specialists in less than six weeks or more.
There’s an awful lot of it that is simply propaganda. They cannot let you believe that a European style (or Canadian for that matter) model would work, otherwise people might demand it.
Susan, I’m going to have to go hide until my blush wears off.
I also cross-posted this to dKos, for the recommending enjoyment of anyone around here who still visits there.
do not count the people in the US who are unemployed.
What is counted are the number of people in the US who are eligible for and register for unemployment insurance.
Now to be eligible for that requires that you have been continuously employed full time for a certain amount of time prior to your claim, and that you have been either laid off or fired from that employment, and conditions apply in the case of being fired.
Full time employees are more expensive for a company, there are a variety of requirements regarding beneifts, taxes, etc in addition to unemployment insurance that do not apply to employees who are not full time.
For quite some time now, US companies have cut costs, especially with low level jobs, by having employees work 37 hour weeks. This means a big savings because you are not a full time employee then, you are a part time employee, and therefore will be ineligible for unemployment, and not counted.
Another cost saving measure, have employees work as independent contractors, not eligible for unemployment, and the employer does not have to contribute social security taxes either.
So when you see X% unemployment in US, what you are seeing is only a fraction of the % of people who are unemployed 😀
What the OECD figures I refer to above count is the number of people who say they have actively looked for work recently and that they are available for work within one week. Unemployment benefit is not relevant.
rolls, it is.
Unless you fall into that category specified above, in US, you are not officially unemployed, because you were never officially employed to begin with.
It’s a household survey conducted at random. I don’t believe their sample is obtained that way. I think you’re confusing national rates with the OECD rates. The methodology is available at the links above if you’re interested.
This link from the BLS gives an answer to your question.
that means it’s a question of faith.
Sorry for the confusion 😀
I understand the confusion, and shared it myself.
Colman, you used the CPD numbers, if I’m following correctly. So your analysis is as comparable to the European numbers as you’re gonna get (given the available sources).
But Ductape’s point is still valid in general — going back to the premise that the numbers we hear in America are misleading. I guarantee the news I see (Paper, TV, Radio) uses the Unemployment Benefits based numbers, not the CPD.
Ah well, it never hurts to clarify these things, especially when we’re dealing with numbers. Numbers have a way of making things feel more real, even tho its not the numbers that count, but agreeing on what you’re counting… (which is the premise of the diary — full circle!)
I’m using the BLS numbers derived from the labour survey.
My aim here is to undermine the meme that “free-market solutions lead to lower unemployment” with the hidden message “welfare makes people lazy and not want to work” that the media spew at us here the whole time.
The numbers that US sources use is another matter. In fact the numbers that any media use can be a mystery. Personally, I think that the U-6 figure unemployed+discouraged+marginally attached is the best measure of unemployment. That’s at 10% in the US as I recall, from the BLS numbers.
If its not clear, I really like and support what you’re doing.
No mystery to which numbers our media is using, they love to tell us (in this case) because it adds credibility (since its from the US Govt).
Its also why I doubt I’ll ever see the day that the US uses the U-6 calculation. Makes us look bad.
For your side of the pond, your approach is right on.
For our side, maybe one of our resident number crunchers can calculate the European (German, French, UK) numbers using the US formula. If we have to explain to our fellow countrymen their preconceived notions are wrong, and to prove it we need to use a new formula that makes the US look bad… its just not a practical goal.
But if we can use our absolutely perfect USofA approved measurements to judge others, why that’s only right and fair! (er, until they see the results… gotta love em).
The OECD figures match the official US figure. What number do you hear reported normally?
relevant to the point of your diary.
Neither random survey nor official US “unemployment” figures represent the actual number of Americans who are not employed.
Maybe more relevant, or at least tangential to your point is that those not counted tend to be, for obvious reasons, poorer, and less likely to have savings or other resources to tide them over, thus incurring greater social costs.
It is also, I think relevant to point out that the notions promoted by the affluent regarding welfare and the facts do have some differences.
While some European countries do have actual welfare programs that are intended to provide for the, well, welfare, of the people, US programs are somewhat different.
There is little help available, for example, for single adults, most “welfare” programs are for families with children only, and even then, another example, the monthly food stamp allotment does not purchase a month’s worth of food.
The “aid to families with dependent children” check that a fraction of indigent with children can qualify for differs by state, but in no state is it sufficient to purchase the basic necessities. Neither is the minimum wage.
So the “welfare” that exists is largely a token gesture, and does not serve to make a significant dent in the social costs that welfare programs are theoretically intended to do.
For a variety of reasons, cultural, religious, and political, the US underclass is not considered by the affluent to be entirely human, and even beyond, the affluent would rather spend MORE of their tax money if they can be assured that the poor will suffer more.
I am sure you have seen studies regarding the comparative costs of housing the homeless as opposed to imprisoning them, the cost of paying expenses for a single mom, including training for a living wage job versus subsuming her children into the prison system, where they will provide there a larger revenue stream to the industry than they would as a low wage earner at Wal-Mart, but also as an inmate they will cost the taxpayer even more!
I purposely avoided all of that stuff: it complicates the argument. I’m hoping to return to it some other time.