EDUCATION INDICATORS: An International Perspective

Indicator 19: Unemployment and Education

Alternative unemployment measures

Indicator 19 utilizes what is considered the conventional unemployment ratethe proportion of 25- to 64-year-olds who are without work but are seeking and currently available for work, as a percentage of the total labor forceto explore the link between unemployment and education. However, there are many different ways to compute a nation's unemployment rate, and reliance on a single indicator does not necessarily provide a complete picture of a particular nation's economy. The Bureau of Labor Statistics (BLS) has published alternative unemployment measures for the United States for over 15 years, recognizing that a single unemployment definition cannot serve all purposes for which such data are needed.

These alternative measures were used to study unemployment in 1989 in the United States, Canada, Japan, France, Germany, Italy, the Netherlands, the United Kingdom, and Sweden.* The alternative unemployment measures range from very narrow to very broad in scope and include:

1. Long duration unemployment rate. Persons unemployed 13 weeks or longer, as a percentage of the civilian labor force.

2. Job loser rate. The number of persons who are unemployed because they have involuntarily lost their last jobs, as a percentage of the civilian labor force. (This measure follows the standard definition of unemployed but does not include unemployed job leavers, first-time labor force entrants, or workforce re-entrants.)

3. Adult unemployment rate. Unemployed persons (those without work, seeking work, and currently available for work) 25 years of age and older, as a percentage of the civilian labor force 25 years of age and older.

4. Full-time unemployment rate. The number of unemployed persons seeking full-time employment, as a percentage of the full-time labor force (including persons working part-time for economic reasons).

5. Conventional unemployment rate. The total number of persons not working, who are available and seeking work, regardless of age, as a percentage of the civilian labor force. This is considered the official U.S. unemployment rate and is typically cited in comparisons.

6. Rate encompassing persons working part-time for economic reasons. Total full-time-job seekers, plus half of the part-time-job seekers, plus half of the total number of persons working part-time for economic reasons, as a percentage of the civilian labor force, less half of the part-time labor force.

7. Rate from measure 6, including discouraged workers. Discouraged workers are people who are jobless and want work, but are not looking for work because they believe they cannot find it. This rate uses the same formula as measure 6, but adds the total number of discouraged workers to both the numerator and the denominator.

Looking at the range of unemployment measures for a country is important for comprehending how its labor market is functioning. The rates in Sweden and Japan illustrate this point.

Sweden had the lowest unemployment rates for five of the seven measures in 1989, including the conventional unemployment rate, owing mainly to its labor market programs that assist the unemployed in actively seeking jobs or labor market training. In many cases these people became employed or enrolled in training before their duration of unemployment became too lengthy or before they became discouraged workers. However, it should be noted that Sweden's unemployment rate that includes persons working part-time for economic reasons (measure 6) was significantly larger than its conventional unemployment rate, indicating that labor slack was channeled much more into underemployment than into unemployment.

Japan also had very low unemployment rates in 1989. In fact, Japan had the lowest or second lowest unemployment rates for all of the indicators. However, Japan's unemployment rate that takes into account part-time workers and discouraged workers (measure 7) was three times that of its conventional unemployment rate and over four times that of the full-time unemployment rate.

These examples illustrate the importance of looking at multiple measures to get a complete picture of a nation's unemployment situation. This is also important when making comparisons across nations. For example, if the job loser rate was used as the measure to compare unemployment across countries, Italy would have the second lowest unemployment rate of the nine countries measured while the United States would be ranked seventh. If the conventional unemployment rate was used however, the United States would be ranked third and Italy would be ranked seventh. The unemployment rate that includes part-time workers and discouraged workers placed the United States third again, but placed Italy last. Finally, the adult unemployment rate found these two countries virtually tied for the third lowest unemployment rate.

Footnotes

*C. Sorrentino. "International comparisons of unemployment indicators", Monthly Labor Review (March 1993).

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