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Feds' figures understate unemployment
Lost in the statistics

by SHARON SMITH | July 20, 2001 | Page 6

UNEMPLOYMENT is back in the headlines, with the June jobless rate edging up to 4.5 percent and the Bush administration predicting it will top 5 percent by summer's end.

Economists are quick to point out that even this jobless rate, while growing, is low by historical standards. But the 4.5 percent statistic masks the actual scale of the problem.

It's widely acknowledged that hundreds of thousands of disheartened workers have given up on finding a job and aren't counted in official statistics. And the number of workers who have taken part-time jobs because no full-time work is available rose to 3.6 million last month.

Moreover, the methods used to gather the Labor Department's payroll statistics are highly suspect. The Labor Department reported that payroll employment fell by 114,000 jobs in June.

But a July 10 Wall Street Journal editorial, titled "Labor Statistics are Lying," argues that the June total is actually a loss of 269,000 jobs.

Lincoln Anderson, the chief investment officer at LPL Financial Services, says that the Labor Department automatically adds 160,000 jobs a month to its totals, in boom or slump, to account for the hires of newly started firms--what it calls the "bias factor." "This bias factor is basically picked out of thin air," Anderson writes.

He argues that the Labor Department's household survey of unemployment, which shows a drop in employment of roughly 1 million over the last five months, is closer to the mark. "[I]t's clear that we have experienced a bigger drop in employment than occurred in the first five months of the 1990 recession," he concludes. But the news media has largely ignored the harsh reality facing workers who are losing their jobs.

Far fewer workers are eligible for unemployment benefits when they lose their jobs today than in past recessions. Fewer than one in three unemployed workers receives unemployment benefits today, compared to more than 40 percent during the 1970s and more than 50 percent in the 1950s.

And most workers have little to fall back on if they lose their jobs.

Between 1983 and 1995, the average net worth of households in the bottom 40 percent of the population declined by 80 percent–from $4,400 to $900–while the net worth of the middle fifth of the population declined by 11 percent. Recent surveys show that 60 percent of workers say that if they get laid off, their savings would last a few months or less. And 27 percent say they don't earn enough to have any savings at all.

The 1990s saw a massive growth of part-time, temporary and contract employees in the labor force. Today, they number more than 34 million workers, representing nearly a third of the workforce.

Many of these workers are part of the battalion of low-wage workers who got jobs in the fast-growing service sector during the 1990s. These are the workers who will be the least likely to qualify for unemployment benefits if they lose their jobs.

Only 18 percent of low-wage workers and 12 percent of part-time workers who are unemployed currently receive benefits. Many workers are automatically excluded because they must have been continuously employed for a minimum period of time, often a year, to qualify.

And employers have a stake in contesting unemployment claims, because their tax rates increase with the number of employees collecting unemployment benefits.

Most states require that in order to qualify for unemployment benefits, even a worker who has been laid off from a part-time job must be available for full-time work--an impossibility for many working mothers. One in five workers today holds a part-time job, and 70 percent of them are women.

Former welfare recipients are especially hard hit when they become unemployed. The Federation of Protestant Welfare Agencies reported a 36 percent increase in emergency food assistance between January 1998 and January 1999 in New York–which it attributed to the gutting of welfare.

Most former welfare recipients have already faced unemployment. One study of former recipients in several cities found that their average pay is just $7 an hour, and their jobs typically last only seven months. But they aren't eligible to return to welfare because of state and federal time limits on welfare benefits passed under Bill Clinton.

Three decades of attacks on workers' rights, which culminated in Clinton's slashing of the social safety net, caused the gap between rich and poor to grow to obscene levels during the 1990s economic boom.

In a recession, this will bring widespread human disaster--unless workers fight back.

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