Defining Labor Underutilization

First, let us define the labor underutilization categories that we will examine regarding U.S. workers. Our estimates of these labor underutilization problems among workers in recent years (2013–2014) are based on findings of the Current Population Survey (CPS) of American households (Fig. 7.1). The CPS is sponsored jointly by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics (BLS) and is the primary source of national labor force statistics.

The unemployed are those who did not work for pay or profit in the reference week of the survey but had actively looked for a job in the past 4 weeks and could

Fig. 7.1 Measuring the unemployed, underemployed, the hidden unemployed, and the underutilized labor force

have taken one if offered. Those persons who were not classified as employed or unemployed are placed into the “not in labor force” category.

The estimates of the numbers of the employed and unemployed are combined to form an estimate of the civilian labor force (Fig. 7.1). By dividing the number of unemployed persons by the civilian labor force, an estimate of the unemployment rate can be obtained. The unemployment rate is the most widely cited measure of labor underutilization in the national and local media, but it covers only a fraction of the labor market problems encountered by workers, especially less educated and low-income workers.

A second labor market problem is that of underemployment. An underemployed person is one who worked part time (under 35 h in the reference week) but desired and was available for full-time work. [1] Nationally, the numbers of underemployed increased sharply during the Great Recession and remained high (7–8 million persons per month) in the early years of the recovery. On average, the underemployed typically work only 21–22 h per week, barely half the mean number of weekly hours worked by the full-time employed. They receive less per hour in wages and thus less than half the mean weekly earnings of the full-time employed. There is a more than a short-time cost to being underemployed. Recent national research evidence has shown that working part time has no statistically significant effect on increasing one's hourly earnings over the long term, which means being underemployed not only leads to earnings losses in the short run but perpetuates them for years to come. [2]

A third measure of labor underutilization is the so-called “hidden unemployed,” or the labor force reserve. This is a fairly sizable group of individuals within the “not in labor force” population. Individuals in this group have not actively looked for a job in the past 4 weeks but expressed a desire for immediate employment at the time of the CPS. Their absence from the labor force reduces their current earnings and future incomes from work.

A subset of this group of the hidden unemployed is referred to by the Bureau of Labor Statistics as the marginally attached. These individuals must have looked for a job at some time in the past 52 weeks and been available to take a job in the reference week. Their numbers are typically only 40 % as high as the total number of the hidden unemployed. But we are focused on measuring the entire pool of hidden unemployed, not just the marginally attached. [3]

Finally, in this chapter, we develop a count of the total pool of underutilized workers in the nation (for a review of the BLS alternative measures of labor underutilization, see U.S. Bureau of Labor Statistics 2008). The underutilized represents the sum of the official unemployed, the underemployed, and the hidden unemployed. We also estimate a labor underutilization rate. This underutilization rate is calculated by dividing the number of underutilized workers by the adjusted civilian labor force. The adjusted civilian labor force represents the sum of the civilian labor force and the numbers of hidden unemployed.

In this report, we will provide estimates of four labor underutilization measures (unemployment rate, underemployment rate, hidden unemployment rate, and labor underutilization rate) for all workers 16 and over.

Defining the Educational Attainment and Household Income Groups

The report is organized primarily around presenting these numbers in relation to the following:

• Educational attainment groups: Workers are assigned to one of six educational attainment groups, ranging from those with no high school diploma or GED to those with a master's or higher degree, including a professional degree (law, medicine, etc.)

– No high school diploma or GED certificate

– High school diploma or GED, no college

– 13–15 years of schooling, no college degree (some college)

– Associate's degree

– Bachelor's degree

– Master's or higher degree

• Household income groups: Workers are categorized into six household income groups, ranging from a low of $20,000 in annual income to a high above $150,000

– Under $20,000

– $20,000 to $40,000

– $40,000 to $75,000

– $75,000 to $100,000

– $100,000 to $150,000

– $150,000 and over

• Combinations of educational attainment/household income group

Disparities in the incidence of each of the four labor market problems across these groups will be presented and highlighted. The size of these disparities in labor market outcomes in 2013–2014 across socioeconomic groups will be shown to be far higher than those prevailing in 1999–2000, at the end of the labor market boom years of the 1990s. First, we will look at the unemployment rate.

  • [1] For an overview and assessment of the rising incidence of underemployment problems during theGreat Recession, see Sum and Khatiwada 2010, pp. 3–13.
  • [2] For evidence on the limited effectiveness of part-time jobs in raising the future wages of U.S. workers, see Tienda et al. 2010; Blau and Kahn 2013.
  • [3] The labor force reserve or hidden unemployed is typically more than twice as large as the marginally attached labor force. For example, in July 2013, the number of persons in the labor force reserve was 6.86 million, while the marginally attached labor force was only 2.53 million.
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