Thursday, August 15, 2013

Unemployment issues

I just posted a comment at that is a shorter version of my previous posts on this issue:

So, I thought I would post it here for easier reference:

I estimate that without MW, emergency UEI, and demographic factors, we'd be crossing below 6% UE by now, near a new, higher base UER.  A lot of this is hard for me to summarize, because the phenomenon is a kind of hybrid of demographic and cyclical issues.  But, here are a few thoughts & factoids:

regarding Minimum Wage (MW):

While the absolute total size of the labor force has increased since 2006/2007, hourly workers declined by 3.6 million, and 1.7 million of those were teens.

The 40% increase in MW means the MW workforce increased from 1.7 to 4.4 million.  In addition to this, some portion of those 3.6 million former hourly labor force participants were effected by the MW increase.  Broad historical correlations would predict about a 1 million increase in UE from this.  Considering the scale of the other numbers, this seems reasonable.  My estimates suggest that, of the effected workers whose wages would have been below the new floor, only 13% would need to be counted as unemployed to get 1 million new UE.  Of course, the number will slowly decline over time, as long as we don't raise MW again.

regarding Emergency Unemployment Insurance (EUI) and demographics:

As a % of LF, UE durations under 27 weeks have been flat for more than a year at about 4.8%, about 1% higher than the flatline levels of previous recoveries.  UE durations of 27+ weeks of workers not on EUI have flatlined at 1.6% of the labor force, which is also 1% higher than earlier recoveries.  All of the declines in UE since early 2012 have been from decreases in the EUI numbers.

The GAO surveyed workers who had used up their emergency UEI.  Of those who were still not employed, more were on SSI benefits than SNAP benefits.

The number of workers over 55 with UE duration over 26 weeks peaked at a little over 1.1 million and is still at 800,000.  For the 65+ age group, it's still at 200,000, the same level as late 2009.
Workers younger than 45 with less than HS education have average UE duration of 28 weeks.  This increases systematically as age & education increase.  45+ year olds with at least some college have UE duration of 36 weeks.  Married workers also have higher UE duration than unmarried workers.  Clearly, older, more educated, married workers have more ability for consumption smoothing.

The LFP of workers over 55 declined until the mid-90's when it started climbing again.  Until the 1960's, UER for this age group basically followed the same pattern as other age groups, suggesting that in that era, older workers had the same income needs and work patterns as other age groups.  From the 1970's to the 1990's, the UER for older workers stayed at a much lower level than younger groups.  The combination of low LFP and low UER suggests that retirement was the overriding factor.  Since the 1990's UER for older workers has come back up, and in the current cycle, is more persistent than for younger age groups.  I think that this reflects the new era where extended retirement and longer lifespans have led baby boomers to retain a partial connection to the labor force, which includes an unprecedented level of discretion.

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