THE BLOG
12/04/2015 03:09 pm ET Updated Dec 06, 2017

The Truth About Unemployment

By Mark Blessington

Have you ever wondered why publicized unemployment is so low yet so many people don't have jobs? The U.S. Department of Labor announced that unemployment in October was 5 percent. The details in the same report, however, show that 37 percent of our working age population did not have a job in October. The same confusion surfaced during the fourth Republican debate. Two candidates said that we have 40 percent unemployment while the moderator said it was 5 percent.

What is going on?

One answer is technical. The 5 percent and 37 percent have the same numerator but different denominators. The 37 percent denominator is "civilian non-institutional population age 16 and older." In other words, if you are 16 or over and not an inmate of an institution (for example, penal and mental facilities, homes for the aged), and not on active duty in the Armed Forces, then you qualify as a potential worker and are included in the denominator. On the other hand, the 5 percent only reflects people who "made specific efforts to find employment." You must do things like apply for a job to be included in the denominator. If you don't actively and frequently try to get a job, then you are officially excluded from the labor market.

The second answer is political. The restrictive definition used to define labor market has better "optics" from a public relations perspective. No U.S. President wants to report a high level of unemployment. By keeping the denominator low, each administration--Republican and Democratic--protects itself from criticism and bad press about the ineffectiveness of their economic policies. Conversely, the interests of the opposing political party are served by referencing the high unemployment statistic.

The third answer involves corporate greed. Business owners prefer low wages, which drives up profits for shareholders and bonuses for senior executives. When many people are unemployed, businesses can pay less. If the large 37 percent unemployment number gets too much attention, then government is more likely to hire unemployed persons or launch jobs stimulus programs. As more people are hired, fewer remain for businesses to hire, which raises their value and allows them to demand higher wages. So businesses want government to focus on the low unemployment figure.

Most workers lose when unemployment is understated. The common labor market definition ignores a wide range of issues. For example, what if someone already tried for months and all they could find were jobs with low pay, no benefits, no career advancement and no valuable training? What if no available jobs utilize their education? What if most of their friends and peers experience the same thing and have also given up on the U.S. job market?

There is another problem: the deflated unemployment figure can give a totally false reading of unemployment. For example, since 2010 real unemployment has been on the rise, while publicized unemployment has steadily declined.

We need to know the real story and not be swayed by politically motivated unemployment statistics.

It is important to remember that our country was founded on self-employment. Most historians estimate that over 80 percent of adult males in the U.S. were self-employed for the first 50 or more years before and after winning independence. These workers would be excluded from the current labor market definition. This makes no sense at all.

As our country changes, so should our concept of how to measure employment. Today's younger generations want self-employment or fulfillment and high flexibility and from their employer. In many ways they are returning to the spirit of our Founders. They want to be independent and fulfilled in their work. They want more control over their professional lives. They don't take the first available job; that's just not a value they share with their parents and grandparents.

There are tremendous benefits to an economy fueled by self-employment. There are no "too big to fail" problems, and income disparity almost disappears. Rather than ignore today's labor force reality, the Department of Labor should be asking more meaningful questions in their monthly employment survey. They should ask questions like: "Have you stopped looking for work because the right job isn't available?" Answers to this question would probably come much closer to the 37 percent than the official 5 percent statistic.

In order to maximize our country's productivity and prosperity, we need a dramatic increase in attractive jobs. Workers can't be shamed into taking jobs with political rhetoric like "get a job you lazy bum!" That tack does not work any more; most of today's labor force is immune to it. The long-term health of our economy depends on offering more jobs that are enticing to workers. Slogans like "pay a living wage" and "provide meaningful, fulfilling work" must become the prevailing economic mantra.

What do you think? Join the debate. Tell us what you think in the comments section below.

Mark Blessington is a sales and marketing consultant and has worked with many of the world's largest corporations. He has written four books, ranging from Deep Economics to Sales Forecasting.

FIXCapitalism.com is dedicated to "saving capitalism from itself." Visit us at www.fixcapitalism.com to join the debate. Follow us on Twitter and Facebook. Sign up for our newsletter to get more insights.