Unemployment statistics, per capita income, etc

Sava · February 19, 2003, 00:47

I recently read that when calculating the unemployment rate of the US, stay at home mom's and dad's are not counted. That got me thinking, the US cannot even do an accurate census, let alone keep track of income tax evaders, let alone enforce income tax laws on cash-only jobs... so how accurate are these unemployment rates that I see in the papers all the time? Forgive me if this is an easy answer, but I'm retarded and need guidance from more experienced and knowledgable 'Poly members. I know that the US uses a variety of tools to approximate the census, but I think that the unemployment rate estimate might be too inaccurate to base policy on. And when comparing other unemployment rates across the world, do their counting methods differ? It just takes a faulty estimate here, a minor miscalculation there, and we're comparing numbers that are effectively inaccurate to a large degree.

The other thing I was thinking about is that whenever I see arguments between Americans and others about the quality of life for people, I routinely see people presenting the per capita income statistic. Considering the enormous gap between rich and poor, I don't think this statistic can be accurate in effectively estimating the average income of Americans. And considering our diversity, I'm not sure there is such a thing as an average American anyhow.

Since these statistics are inaccurate, I wonder how inaccurate they are. I would also like to see a statistical analysis of the distribution of wealth. Capitalists always tell me that supply and demand dictates prices and wages. But I think that this may be a fallacy. There is essentially infinite high demand for food and health care. I mean, people need to eat. And in this current economy, most people need automobiles, cars, and telecommunications. Could the huge profits that corporations take actually be making our economies and production capacities inefficient? I mean, if we took the money that is wasted on CEO bonuses, corporate fringe benefits and such, I bet it would come to an enormous figure. All things being equal, if that amount of money were put back into the system instead of going into the pockets of the rich, would it make our economy more efficient? I'm not going to speculate on the answer... the usual suspects of lefties and righties will no doubt choose their sides without bothering to think about my questions, but I only hope that some of our more economically minded and statistically gifted 'Poly members put their political views aside and actually think about this.

My gut tells me that capitalism might be more inefficient than it's fans think. But please, don't think in black and white. This isn't a discussion of capitalism vs. communism... both are extremes and IMO, both don't work. In the broadest sense, the total value of wealth in this world is essentially the total amount of labor hours that the population provides. And if the economy is the total amount of wealth, then it would be a relative constant to the number of able-bodied workers. So the notion that all things being equal, the economy goes up and down at will, is false. Would a more equal distribution of wages be more efficient? *** NOTE I am not talking about the state seizing property or progessive taxation policies, or tax cuts... so please don't go down that road. I simply want to better understand currency, statistics, the idea of a market society, and labor in an attempt to improve the quality of life for human civilization.

David Floyd · February 19, 2003, 00:49

Quote:

This isn't a discussion of capitalism vs. communism... both are extremes and IMO, both don't work.

History has proved communism doesn't work, but history has yet to prove the same about capitalism.

Urban Ranger · February 19, 2003, 00:53

Quote:

Originally posted by David Floyd
History has proved communism doesn't work, but history has yet to prove the same about capitalism.

Why do you always jack other people's threads, David?

David Floyd · February 19, 2003, 00:53

Sorry. Ignore me.

orange · February 19, 2003, 00:54

Quote:

Originally posted by David Floyd

History has proved communism doesn't work, but history has yet to prove the same about capitalism.

bull. Pure communism has never existed. Stalinism != Communism.

Sava · February 19, 2003, 00:58

dammit you buttholes... WtF did I say... the first damn post... DAMN YOU FLOYD!

David Floyd · February 19, 2003, 00:59

Well when someone stipulates a "fact", and then says not to discuss it as if it is a fact, I might bring it up

But I won't say any more about it.

Urban Ranger · February 19, 2003, 01:01

Quote:

Originally posted by Sava
The other thing I was thinking about is that whenever I see arguments between Americans and others about the quality of life for people, I routinely see people presenting the per capita income statistic. Considering the enormous gap between rich and poor, I don't think this statistic can be accurate in effectively estimating the average income of Americans. And considering our diversity, I'm not sure there is such a thing as an average American anyhow.

Okay, suppose the income distribution follows a normal distribution ("bell curve"), there are several things you need to know.

Arithematic mean (average)
Median - median is the value where 50% of the curve is to its left and 50% is to its right
Mode - mode is the value of the highest point on the curve
Range - range is simply max - min

The average is easily skewed when there are just a few excessively rich people. The median usually gives you a better picture, but it too can be skewed. The mode gives you the clearest picture of how your average Joe on the street is doing in terms of income.

Sava · February 19, 2003, 01:15

Quote:

Originally posted by David Floyd
Well when someone stipulates a "fact", and then says not to discuss it as if it is a fact, I might bring it up

But I won't say any more about it.

I said... "IMO both don't work..."

SO STOP IT NOW!

Sava · February 19, 2003, 01:16

I think there are a ton of excessively rich people skewing the line as well as undocumented poverty that isn't represented in such averages.

Urban Ranger · February 19, 2003, 01:51

So the average won't work, you need these other numbers.

DuncanK · February 19, 2003, 01:55

Quote:

Originally posted by David Floyd

History has proved communism doesn't work, but history has yet to prove the same about capitalism.

Those things can't be proven.

Imran Siddiqui · February 19, 2003, 01:56

The unemployment rate counts people that work, and then includes people that collect unemployment insurance and take advantage of government programs like COBRA (health insurance for 18 months after you've been fired), to determine the rate.

It's the only way to do it. Like you said, you can't count those people that simply make no effort to find a job.

DuncanK · February 19, 2003, 02:00

Quote:

Originally posted by Urban Ranger
So the average won't work, you need these other numbers.

Just throw the the whole ****ed up thing out. You can never make capitalism fair and work at the same time. Why do you think all these social democracies like Canada are so far in debt they have to raise taxes on the middle class?

Yes, I'm jacking your thread. Sorry, I'm a straight up communist. If you want me to shut up fine, but if me an the libertarians can't participate in this thread then it's gonna be pretty ****in' boring.

Sorry UR. This is not even a response to you. I just got started.

Imran Siddiqui · February 19, 2003, 02:14

Stop threadjacking

.

We get Floyd shut up and then you start up. Oy vey!

Urban Ranger · February 19, 2003, 02:27

Quote:

Originally posted by DuncanK
Just throw the the whole ****ed up thing out. You can never make capitalism fair and work at the same time.

I don't think that's what this thread is about. I just tried to answer Sava's question without dragging in some ideological debate, that's all.

DuncanK · February 19, 2003, 02:35

I know, I apologised at the end. It was kind of a mistake to make my post a response to your post.

Kropotkin · February 19, 2003, 02:40

Quote:

And when comparing other unemployment rates across the world, do their counting methods differ? It just takes a faulty estimate here, a minor miscalculation there, and we're comparing numbers that are effectively inaccurate to a large degree.

AFAIK the differenses between for example the US and most European countries are quite large and significant. thus a serious observer compare the trends and changes in the countries with each others, not the raw figures.

Ben Kenobi · February 19, 2003, 03:10

Where are the resident econo-weenies on Apolyton?

C'mon. Give Sava a hand.

One difference between the unemployment rate of Canada and the US is in who counts as 'looking for work.' IIRC, the US has a more stringent definition than Canada. This is why Canada always has a higher unemployment than the US.

Wish I knew precisely the difference between the two, and how to convert to correctly compare.

Sorry Sava.

DuncanK · February 19, 2003, 03:37

Ok, I'll give him a little something. The unemployment rate may be higher if the economy is in transtion and workers are going from old industries to new industries. This is not a bad thing.

HershOstropoler · February 19, 2003, 03:54

The US BLS and Eurostat use the ILO standard for the unemployment rate. So on the standard they are comparable. There are other numbers foating around, like the insured unemployment rate (about 3 % for the US and the UK), or the german national standard (above 10 % vs 8.5 % or so on ILO).

The BLS unemployment rate is based on a household survey. Employment is based on a household and business survey, with an added fudge factor for the problems in that survey. Revisions use especially payroll tax data.

As for comparing income data, the key problem is with currency conversion. As for quality of life, GDP data are only losely related to it.

Lawrence of Arabia · February 19, 2003, 14:35

THis is how employmet is calculated across the world

First off, they divide the population into Working Age and non working age. In the US i believe that the working age is greater then or equal to 16 years old.

Then they divide up the Working age pop into two categories. 'In the Labor Force' and 'Not in the Labor Force.' To be considered not in the labor fource, the person must not have worked during the reference period (during the last 4 weeks) for monetary compensation or did not work in the last 15 days w/o monetary compensation)

The 'In the Labor force' is again divided into two categories. 'Employed' and 'Umemployed' The definition of Unemployed is not working, but looking for a job.

The Unemployment rate is calculated by taking the Unemployed and dividing by In the labor force, and multiplying the answer by 100.

Labor force participation rate is equal to the 'Inthe labor force' divided by 'working age population' multiplied by 100

There are four types of Unemployment in a free market system
1. Frictional: this is unemployment when people change jobs or moving from one job to another. This occurs in each free market economy

2. Cyclical: this results from the boom/bust cycle. (this is what we are experienceing now)

3. Seasonal: some jobs, like farming and harvesting, need very few workers during the winter, but need more when harvest time comes. Seasonal unemployment are those farmhands who get laid off after harvest. Can also apply to other industries (like tourism)

4. Structural: this is unemployment due to change in the structure of an economy. THis is when a whole section of the economy gets unemployed. If Bush had not put steel tariffs, the majority of the steel industry would have been laied off, and there would be very few oppertunities for them to get another job in that industry. Their skills are no longer needed.

In a command economy there is no unemployment. The state gives everyone a job.

There are some drawbacks to this system of calculating unemployment in both 3rd world and 1st workd countries

1. Discouraged Worker Syndrome (1st World) During a long recession. a worker may not find a job and may stop looking for it. The worker will then get placed in the 'Not in the Labor Force' category, even though he wants a job.

2. Non monetary compensation (1st World) Housewives/men who don't work are counted in the 'Not in the labor force' even though they increase the productivity of their husband/wife.

3. Underemployment (3rd world countries) 3rd world countires have the unique problem of underemployment. When asking a worker in the 3rd world if he/she has worked in the last 4 weeks, he or she may say yes, even thought he/she may have worked for 4 days on a family farm, or for a friend. That worker is not really employed, but is counted in the employed category. There is a lot of hidden unemployment.

Hope that helps you out.

Lawrence of Arabia · February 19, 2003, 14:40

Quote:

The other thing I was thinking about is that whenever I see arguments between Americans and others about the quality of life for people, I routinely see people presenting the per capita income statistic. Considering the enormous gap between rich and poor, I don't think this statistic can be accurate in effectively estimating the average income of Americans. And considering our diversity, I'm not sure there is such a thing as an average American anyhow.

Per Capita income is a good measure of how well off a person is in a 1st world country. However, in third world countries, this is a very bad way of measuring growth.

In Less Developed Countries (LDCs) an increase in GDP does not necessairly mean an increase in the standard of living for the people. In these countries especially it is important to remeber that an increase in GDP may only benefit the top .5% of the country. In this case, economists use the Human Development Index (HDI) This is an index which compiles average life expecancy, GDP per capita, rate of infant mortality, rate of literacy, and a bunch of other things. When the HDI increases at an increased rate, economists know that the increase in GDP is helping the standard of living in these 3rd world countries. If a corresponding increase in GDP does not lead to a increase of the HDI, then we know that it is just helping the top few.

Hope that helps.

Lawrence of Arabia · February 19, 2003, 15:15

Quote:

Capitalists always tell me that supply and demand dictates prices and wages. But I think that this may be a fallacy. There is essentially infinite high demand for food and health care. I mean, people need to eat. And in this current economy, most people need automobiles, cars, and telecommunications. Could the huge profits that corporations take actually be making our economies and production capacities inefficient? I mean, if we took the money that is wasted on CEO bonuses, corporate fringe benefits and such, I bet it would come to an enormous figure. All things being equal, if that amount of money were put back into the system instead of going into the pockets of the rich, would it make our economy more efficient? I'm not going to speculate on the answer... the usual suspects of lefties and righties will no doubt choose their sides without bothering to think about my questions, but I only hope that some of our more economically minded and statistically gifted 'Poly members put their political views aside and actually think about this.

First of all, economics is the study of how unlimited human wants can be supplied to by a finite amount of resources.

First of all, you make a good point. People need to eat to stay alive. (but people do not need healthcare to live - see 3rd world countries) When there are no clear alternative for a good (inthis case there is no clear alternative for food) economists say that the the good is inelastic. This means that an increase in price will not result in a large decrease in consumption. It also means that a decrease in price will not result in a large increase of consumption.
People will eat about the same amount of food weather it is expensive or not.

Heres a demand and supply diagram. Q is quantity (or consumption) and P is price. D is a the demand curve of a unit elastic good. This is a good where an increase in price will result in a proportional decrease in quantity bought and visaversa. D' is a demand curve which is inelastic. E is the equilibrium. At this price, the quantity demanded will be equal to the quantity supplied. THis is also known as the market clearning price.

Now look at the unit elastic line D. An increase in price along that curve from P to P' will result in a decrease of quantity from Q to Q''. (look carefully at the difference in distances)
On the inelastic curve D', an increase in price from P to P' will reseult in a drop of quantity from Q to Q'. Notice how a large increase in price has resulted in a small decrease in quantity demanded.

Now, why don't corporations who supply food just jack up the price so they can make a lot. AFter all, a large increase in price means that people will only buy a little less of the good. They will make more money.

There are two reasons for this. One is domestic competition, and the other is international competition. Domestically in the US, the cost of producing food is about the same. Labor costs are about equal, and each farm has lots of capital (machines to help them out)

The beauty of free trade is that if these farmers charge too much, the cheap foreign goods will keep the prices down. In third world countries, labor is very very cheap. There are no machines. The food produced there is a lot cheaper to buy in the US then US produced goods. THis is why BUsh has subsidized the US farmers: to keep their costs lower and to keep them competitive.

Now, using the same graph, and the unit elastic Demand curve (so it doesnt get too clutered along the X axis) we will say that the price of US produced food is P, and the quantity bought is Q. WE will also say that the price of food on the international market (foreign goods) is P'', and the quantity supplied is Q'''. (When these goods flood the US market, it will mean an increase in the supply curve (supply curve shifts right until new e is reached at the intersection of P'' and Q'''. However, in this graph, we will not show an increase in the supply curve because one is not needed to show what happens)

In the US market with foreign goods, the market will now buy P'' - F - Q4 - O of the domestic food, and Q4 - F - G - Q''' of the foreign food. Notice how the foreign section is larger then the domestic section. All US farmers whos costs (thats the supply curve because supply is dependant on costs and number of suppliers and expectations about prices) are above P''' will go out of buisness.

Enter the tariff/ subsidy

The tariff/subsidy means that the price of foreign goods will now be at P3. Using the same method as before, we can see that domestic goods will now be at P3 - H - Q'' - O. This is an increase of american food bought by the market. Foreign foods has decresaed to Q'' - H - I -Q5. There are also more US farmers who can stay in buisness. (up from F to H)

So what has this tariff/subsidy done? It has increased the price for consumers (thus more money for these corporations) and has decreased the supply. (thus more money for these corporations)

Which is why free trade is a good thing. It keeps corporate profits down, espically for the goods we need the most

(graph is coming in the next post)

Lawrence of Arabia · February 19, 2003, 15:19

GRaph (yeah i know its a little complicated. read it slowly, and you'll get it)

Lawrence of Arabia · February 19, 2003, 19:32

bump for sava.

SlowwHand · February 19, 2003, 19:36

Unemployment statisics do not reflect workers without benefits.
Workers out of unemployment benefits or not eligibile for benefits, are not represented in this number.

It should be used as a baseline only. A point of reference.

chequita guevara · February 19, 2003, 19:49

Quote:

Originally posted by Lawrence of Arabia
3. Underemployment (3rd world countries) 3rd world countires have the unique problem of underemployment. When asking a worker in the 3rd world if he/she has worked in the last 4 weeks, he or she may say yes, even thought he/she may have worked for 4 days on a family farm, or for a friend. That worker is not really employed, but is counted in the employed category. There is a lot of hidden unemployment.

Hope that helps you out.

Underemployment is not unique to the Third World. Quite a few people in the US are underemployed also, working only ten to twenty hours a week, when they need forty hours. There are no official statistics but I've often been told it's generally about half the unemployment rate.

SlowwHand · February 19, 2003, 19:54

True, part timers who actually are in need of full time work.
Underemployed workers as a whole, not represented.

Skanky Burns · February 19, 2003, 19:57

The Australian Census takes that into account, where "Working full-time is defined as having worked 35 hours or more in all jobs during the week prior to Census Night."

So people working under 35 hours would be classified as unemployed, despite the fact that they worked. (Hmm, that means I was unemployed during the last census according to this).