Unemployment Is a Serious Social Issue

Unemployment is a Serious Social Issue

Unemployment is the condition and extent of individuals out of work within an economy, measured by the "official" unemployment rate (U-5). This measure is the number of unemployed workers divided by the total civilian labor force. As of June the "official" unemployment rate stands at 9.2%. What is rarely reported, and even more ominous, is the underemployment rate. This rate includes two groups that are not considered in the official unemployment rate: discouraged and part-time workers (U.S. Congress, 1986, p. 12). As of June 2011 the U-6 rate stands at 16.2%. There is evidence that underemployment is pervasive in the United States. Some types can be measured more easily than others but it is apparent that many Americans are underemployed (Meyer, 1985, p.20) and because that figure is rarely ever spoken about, the costs, hardships and extent of unemployment are not fully reported or understood (U.S. Congress, 1986, p. 12). Recent studies suggest that unemployment has become a serious social issue in the United States due to the under-reported unemployment rate, the increase in financial hardship to American families, and the policies of government.

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When we do not include individuals who are discouraged, or those working part-time in the "official" unemployment rate, we are underreporting the true extent of unemployment, and creating various socioeconomic problems. Exactly what is the definition of underemployment? In developing a definition of underemployment three elements are essential and should be considered: hours worked, skill utilization and compensation. If a person is willing, available, and able to work full time who is working less than 35 hours per week they are considered underemployed. Likewise, workers that are employed at jobs that do not fully utilize their skill levels are considered underemployed. Finally, those that receive inadequate pay either below the subsistence level or less than the norm for that job are considered underemployed (Meyer, 1985, p. 10).

Because the unemployment rate is calculated using CPS data, counts of the employed, self-employed, unemployed, and those individuals in or out of the labor pool will depend on how people answer questions regarding their activity during the surveyed week (Barrow, 2004, p. 24).

Having an accurate and true picture of the full extent of the unemployment problem is important for many socioeconomic reasons. First, there is the issue with trade and technological change in our economy. Technology and trade put pressure on us to increase the skill level of our employable population (Lynch, 2005, p. 29). This has a direct effect on the type of jobs we create in America. As manufacturing becomes more technology driven and productivity increases, the number of jobs in that sector decreases. As a result, the entire growth of jobs over the past decade has been almost entirely in the service and trade area (Meyer, 1985, p.44). Also, as Meyer states the service sector (including wholesale and retail trade) creates the lowest paying jobs, which results in a larger share of the underemployed (Meyer, 1985, p. 44). And when it comes to trade (goods we export to other countries) we have another issue. The products we export are technology intensive; the products we import are labor intensive. Even with a neutral trade balance, we lose jobs in a ratio of three to four. We create about 30,000 jobs for every billion dollars we export. In 1983 we exported about 200 billion dollars creating 6 million jobs. We imported about $260 billion, which helped to create about 10.4 million jobs out of our country. The only way we can decrease the unemployment rate and in extension the underemployment rate is to have a trade surplus of more than 25 percent (Meyer, 1985, p. 46).

Underreporting the unemployment rate also has implications on where and how many jobs we create. The unemployment/underemployment rate is not spread evenly across the United States. Many areas are worse off than others, some areas in America can be deemed economically depressed. Businesses that may potentially relocate to depressed areas look at the potential labor pool available for employment in their decision process. Underreporting of unemployment may keep businesses from relocating (U.S. Congress, 1986). With more people being out of work, and for longer periods time, we see an increase in financial hardships to American families.

With the official unemployment rate at 9.2% and the underemployment rate hovering at 16.2% it is estimated that nearly 11 of every 100 workers permanently lost their jobs over a three-year period (McLaughlin, 2011, p. 1). It is also understood that those who are less employable are individuals who will remain unemployed longer and are less likely to be rehired (Aaronson, 2010, p. 32). One cannot ignore the financial ramifications this causes to American families.

To understand the financial hardships the unemployed face we must first study where their financial support comes from. Financial resources utilized by a study of 324 unemployed blue collar workers included unemployment benefits (48%), federal means-tested programs (56%), public assistance (44%), and 20% were assisted by charitable organizations (Sales, 1995, p. 487). Further, the unemployed relied on family and friends (42%), their own ability to earn money (41%), personal savings (23%), and loans (17%) (Sales, 1995, p. 488). It is also apparent that the longer the unemployment period, the greater the financial problems become. More than one-half of the households (51%) in the first six months after a job loss had annual incomes above $15,000. In comparison, those out of work more than two years showed extreme economic hardship, with nearly two-thirds (61%) living on less than $8,000 a year (Sales, 1995, p. 487). So we can see that those unemployed for longer periods had far fewer resources and relied much more heavily on public assistance (Sales, 1995, p. 490). In fact if unemployment stretches out to a period of 2 years or longer we see the following results:

* Household savings were significantly diminished after two years of unemployment with 33% of those surveyed using this resource