Unemployment - Does joblessness have to mean hopelessness?

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Millions of jobs have been lost, hundreds of thousands of
businesses closed, and I asked every American to join me
to fight the foes we face joblessness and hopelessness. We
can put people to work in good jobs. We can
reward work.
When President Joe Biden spoke at his inauguration, among the
many problems he talked about, jobs and job loss kept
coming up.
I understand that many of my fellow Americans viewed the
few future was fear in trepidation. I understand they worry
about their jobs.
It's not just the president who cares about this. Not
having a job has such a strong impact on people's lives.
My dad was unemployed when I was a kid, and
it was a scary time. It shaped the choices my
dad made, but it's also shaped the choices I've made
as an adult.
And Betsy, you would chief economists at the US Department
of Labor under President Obama when Joe Biden was Vice President.
How much time did you guys spend focusing on unemployment?
Actually, that was pretty much all I did. I was
either working to ensure that families devastated by the loss
of income had access to unemployment insurance they would give
them cash they needed, or working to come up with
ways the government could help create more jobs or help
people find or get trained for jobs.
And unemployment is the topic of this week's Think Like
an Economist With me, Justin.
Wolfis and with me, Betsy Stevenson, we teach you the
super tools of economics to transform your lives nast' in
tabercoli fars with.
Us, Betsy. The Department of Labor must deal in big numbers,
such as looking at tens of millions of people and
their jobs. But for a lot of people, their job
can really go to the core of their identity. How
do you look at these millions of people with all
their personal hopes and fears.
Well, you know, the numbers tell us something about the
reasons that people are likely to be unemployed and how
likely they are to find work. But most importantly, you
just got to realize that behind the unemployment statistics are
real families struggling to pay their rent or their mortgage
or put food on the table, their parents that look worried,
and kids who don't really understand why they can no
longer have ice cream or or get the new book
that all their friends are reading.
Did you know that at the start of the Great Depression,
the US Labor Department didn't know how many people were unemployed.
They simply didn't have any way of measuring unemployment.
Yeah, the Secretary of Labor got into an argument with
a senator who was a leading labor rights proponent at
the time named Robert Wagner about how many people in
the US were unemployed. The Department of Labor had existed
for decades measuring employment, and the unemployed were just sort
of assumed to be any man who didn't have a job.
The rest of the world had a similar problem, so
governments tried to come to a common understanding of what
it meant to be unemployed so that we could measure
it and then compare apples with apples. The agreement was
to focus on adults and not just on men, but
all people who didn't have work, who wanted to work,
and who were therefore trying to find work.
When it comes to talking about the labor market, there's
some simple definitions. People with jobs are employed. People who
are jobless, looking for a job and available to work
are unemployed. The labor is the word we use for
putting those two together, the employed and the unemployed. And
then people who are neither employed nor unemployed are not
in the labor force.
The statistic that we hear about every month in the
news is the unemployment rate. So let's talk about exactly
what this is.
It's simply the share of the labor force that's unemployed,
so it's the share of people who want to work
who can't find a job. In December twenty twenty, the
unemployment rate was six point seven percent in the United States,
which was roughly twice what it had been a year earlier.
The pandemic has caused a lot of unemployment.
A lot of these people will go back to jobs
once businesses reopen. Hopefully they counted amongst the unemployed.
Now that's a great question, and the pandemic highlighted the
fact that measuring unemployment relies on people like you and
me responding to surveys. The goal is to count all
those people experiencing what is hopefully temporary job loss as
being unemployed, but some people told surveys they were still
employed after all, They also hoped to go back to
their job.
Some people saw these misclassifications as being a scandal, but
to me they were just a good reminder that unemployment
is really about people, and lots of people were confused
about what was happening with their employment during the pandemic.
These definitions we're talking about are just a way to
try to measure unemployment. No measurement is ever perfect.
Let's talk about people who give up. It's always seemed
to me that we assume away the problem when we
don't count people who are so bummed out looking for
work that they stop looking for work as unemployed, it
seems a bit arbitrary.
That's the toughest part of measuring unemployment. There are a
lot of people who give up or just realize their
time is better off spent on something else other than
looking for a job, like maybe looking after their kids.
Yeah, I remember that. In our episode on the labor Market,
we spoke to a stay at home parent called Megan,
who loved her job as a domestic violence advocate, but
she told us that sadly, childcare is too expensive, so
it doesn't make financial sense for her to work.
Once my second child came along, we realized that the
cost of infant care by itself was outrageous, but having
to pay for two children with the salary that I had,
it turned out to be not reasonable or really doable
at that time. So that's why we decided that it
was better that I stay home. That job it was
really like where my passion was at that time. I
loved it.
So Meghan is not technically unemployed. There are alternative measures
of unemployment that are broad it and try to capture
people like Meghan and others that you might think we
should consider as unemployed. For Megan, she's marginally attached. People
in this category have looked for a job in the
past year, but they're not look for one right now.
Some of them marginally attached have family commitments like Megan,
or have health problems.
Right and without paid leave. Somebody with a health problem
might lose their job, and because they can't look for work,
they aren't even counted as unemployed. I mean, in some country,
people with health problems get access to paid leave and
then they still get counted as employed.
Another reason people are marginally attached is when they're not
looking for work because they don't think there's a job
out there for them. We call these people discouraged workers.
What about people who can't find jobs using their skills,
so they take what they hope is a temporary job,
like working in a coffee shop.
They're not unemployed. Instead, we say these people are underemployed.
The problem is that there's not a good way to
measure how many people are in this sort of situation.
After all, everyone would like a better job. And sometimes
you see someone working a job that seems like a
poor fit for them because it's helping them earn money
while they work on their art or they're writing, you know,
like an actor waiting tables.
We can get really philosophical thinking about this. Was JK.
Rowling underemployed when she was working as a teacher and
writing Harry Potter in her spare time.
What we can more easily measures if you're working part time,
and you'd really prefer to work full time, but there
are an any full time jobs that you can find.
Let's recap. The unemployed are people without jobs who are
available to take a job and are actively looking for one.
But there are a bunch of people for whom the
labor market might not quite be working that well, who
aren't technically unemployed.
And even if they're not technically unemployed, we still care
about them.
At the start of the episode, President Biden equated joblessness
with hopelessness, and a lot of us do find unemployment frightening.
Wouldn't zero unemployment be the ideal outcome?
Yeah, zero unemployment would be great, but it might be
pretty difficult to achieve. Economists often say that there are
three main reasons for why people experience unemployment. First, it
just takes some time to match people looking for jobs
with those offering them. We call this frictional unemployment.
Frictional unemployments basically information problem. It's me offering a job
that's perfect for you, Naz, but you not knowing this
job's available. The main way workers and employers find each
other is through job postings, through word of mouth, or
recruiting firms. Anything that makes it easier for workers to
find out about jobs, or jobs to find out about
workers helps reduce unemployment.
So policy or technology solutions that help workers and employers
find each other faster can actually lower a country's unemployment
rate and reduce that wasteful period of unemployment.
Sometimes, though, the problem is deeper. It's a mismatch in skills,
so workers need to get new skills to make it
easier at find a job. Also need to think differently
about the kinds of jobs that they're going to be
likely to find. For example, manufacturing jobs have been declining
for decades in the US, whereas the service industry is growing.
There are actually still lots of new jobs in manufacturing
all the time that are getting created. But here's the thing,
there are more people searching for these jobs than there
are new jobs. It's like a game of musical chairs
without enough chairs. If you stay in the game long enough,
you'll ultimately get a seat, but you might be better
off switching to the musical chairs game to your right
that has more chairs than people playing. So if you're
an auto worker out of a job, you might want
to consider training for a new industry.
How do policymakers deal with this change in skills that
employees want well.
This is where unemployment and education and training start to intersect.
It's important to help people think more broadly about how
they can use their skills in the current labor market,
but also to help them get training that will lead
to a new job. Job search assistance has also been
shown to be really helpful to get workers back into jobs.
There's also a category of unemployment that economists called structural unemployment.
This is the unemployment that is just really hard to
tackle because it's related to a structural phenomenon in the economy. Formally,
we think about it as there being more people who
want to work at a going wage than there are
businesses willing to hire people at that wage. In a sense,
the wage gets stuck at a rate too high to
get rid of. Unemployment.
Yeah, so structural unemployment can happen even when an economy
is really strong. The category of unemployment that people think
the most about, I think, is what we call cyclical unemployment.
This is the unemployment that results during a recession or
a downturn.
Economists talk about the ups and downs in the economy
as being the business cycle. So the unemployment that results
from the downs is cyclical, you know, related to the cycle.
You know what's tough about it is that while the
economy will eventually bounce back, not all the workers who
lose jobs during a recession will bounce back. I mean, actually,
any kind of unemployment becomes more problematic the longer people
have been unemployed. Most people are only unemployed for a
few months, usually reflecting that frictional unemployment. You know the
fact that it takes time to find a new job
once you've lost one. But some people can find it
hard to find work and they end up unemployed for
a really long time, like over six months.
And when there's a recession, that aren't enough jobs. So
I'm guessing more people can end up unemployed for a
long time.
That's right, and it's a huge problem. And you know,
that can create its own kind of structural unemployment, is
employers become reluctant to hire those who haven't worked in
a long time, or those workers might ultimately become discouraged
and drop out of the unemployment statistics.
We've talked about government trying to help reduce unemployment by
helping people find jobs and train them for new jobs,
but does government ever do things that creates unemployment.
They do. Some laws have the effect of actually raising unemployment.
For example, if the government mandates compensation or wages that
are too high, or makes it too hard to fire people,
or makes it unappealing to create new jobs, then we
might end up in a situation where a lot more
people want to work than employers want to hire them.
And those are examples of that kind of structural unemployment
that can be really hard to deal with.
You know, it's not just about the economy, though. I
find my work is a big part of who I am,
and I think a lot of people feel similar. I'd
feel devastated if I couldn't get a job, and especially
one that I cared about.
Unemployment is really stressful and can make people feel isolated
and question their self worth. There's this stigma to being unemployed,
and it can impact the entire family. Research also shows
that children whose parents become unemployed can themselves have worse
educational and employment outcomes as an adult.
It gets harder to find a job the longer without work.
Employers will discriminate against the long term unemployed, and even
when those who lose jobs in a recession get jobs.
It's often at a lower wage and often with a
worse job as well.
Our good friend and now Treasury Secretary Janet Yellen says
the following long term unemployment can make any worker progressively
less employable, even after the economy strengthens. You know, that's
really just saying that the economy bounces back, but not
everyone does.
This all sounds really bleak. The thing is, a lot
of us may be unemployed at some point in our lives.
So how can we prepare ourselves so we can bounce
back and not suffer so much?
Well, one thing is just to be relentless about searching
for a job and try to avoid falling into the
trap of being unemployed for a long time. If after
several weeks of search, a job comes along isn't perfect,
but it's okay, you might want to take it and
then look for another job. From that position of strength,
you could always keep looking for a job even when
you found a new one. Let me add, if you
can try to save some money when you're working, that
can be a nestic that'll help you when you lose
your job.
You know, research shows that looking for a job when
you're unemployed is a really miserable time in your day.
And you know what can be even harder is reaching
out to people you know and asking for help. Right,
we already said that it's a real hit to your
self worth, but tap into your networks. People underestimate just
how many job offers and even information about what's out
there comes from word of mouth. You're also more likely
to get hired if you have a referral. So if
you're looking for a job, don't lose touch with people,
don't be afraid to reach out, let them know that
you're looking, and don't lose hope. Betsy, justin thank you
andy Na's it was great talking with you, and if
you ever find yourself looking for work, I'm gonna have
your back.
Richet to your friends. We're here to help you, mate.
That's exactly what I was thinking when you said that.
It's really important. People really need to rely on the
people that they know, and people want to help, they
really do. But boy, I know how hard it can
be to ask for that help.
You know, Apart from the first job I got and
apart from university, I think everything I've done in my
life has totally come from you know, like asking people
I know which is a very weird thing to think about.
No, people hate the idea that referrals really matter so
much in the labor market, and they think like, maybe
it's not merit based. But there's really really nice research
on the that shows that when you hire somebody with
a referral, they tend to stay with a company longer
and be more productive. So that information that your friends
are giving the problem is is that it's actually good,
and so that's why referrals are going to continue to matter.
Thanks for listening.
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