Unemployment is one of the hottest debates in American politics. In part, this is because the issue touches simultaneously on so many different areas of public policy. Labor reform, government spending, social services, even the federal interest rate all have to do with jobs and joblessness.
At the same time, though, the unemployment debate carries a lot of emotional and social baggage. Who needs work and how much that has to do with personal choices defines much of this conversation.
Like any major political topic, this one has its own particular set of facts and mythologies. Now that Republicans in Congress are poised to revisit much of the social safety net, it's worth considering a few of the big myths and misunderstandings around unemployment and the unemployed.
The unemployment rate is more complicated than the name makes it seem. This is not a measure of Americans without jobs but rather a measure of Americans in the labor force without jobs.
The Bureau of Labor Statistics counts someone as unemployed if he doesn't have a job, has actively looked for one within the last four weeks and is available for work.
The BLS does this, because measuring the raw number of unemployed persons would be misleading. The unemployment rate reflects how many jobs, generally, the economy wants and needs. Including retirees, children, full time students, stay-at-home parents or others who are jobless by choice would blow the number up past the point of usefulness.
The unemployment rate is a very important number, but it's only one of many.
In addition to unemployment there's also the under-employment rate, the labor force participation rate, the quit rate, the median wage, inflation and many more metrics. Together these statistics paint a complete portrait of the labor market, one that you won't get just by looking at a single statistic.
"There's always a lot of debate about how accurate the headline unemployment number really is," said Richard Barrington, senior financial analyst with MoneyRates.com. "But what I find an interesting statistic to look at is the median duration of unemployment… To give you an indication, at the worst of the post-recession job front that number got up to 22 weeks. That was the median."
"To me that really underscored that it was not a temporary setback," he added. "That was a major portion of your life."
Almost all labor statistics are presented as a single, national finding. This is true even when the BLS has statistics broken down on a regional basis. The trouble is, the national labor experience is anything but uniform.
"When people talk about the job market and the economy in general, they tend to look at these national job numbers and talk about it as if it were one big homogenous economy," said Barrington. "But the differences when you go from one part of the economy to another are striking."
"The real story, depending on where you live, is state by state," he continued. "The unemployment rate ranges from a low of 2.3% in Colorado to a high of 6.7% in Alaska. Anywhere in between there you have a whole range of different numbers and these make for very different labor markets."
Often, when it comes to labor data, we miss the trees for the forest. It's important to remember that beneath the median numbers are regional differences that range widely.
Unemployment and unemployment benefits do not necessarily go hand in hand.
To qualify for unemployment benefits you must have lost your job both involuntarily and through no fault of your own. So people who quit their jobs or were fired for cause are out of luck. You must also meet your state's wage and hour requirements. Those rules establish the minimum employment standards before unemployment coverage kicks in. So, no working at Hot Topic for two weeks and then showing up at the local benefits office.
Finally, you must have been employed by a third party in a normal job. The self-employed and entrepreneurs need not apply.
Then, maybe if you meet all those criteria, you can get benefits.
One of the stock characters in political debate is the lazy welfare sponge. Whether Reagan's Cadillac queens ( a lie) or the Fox News perpetuation of the food stamps for lobster assertion ( a misleading truth), it is an article of faith among many Americans that social benefits are far too generous. When it comes to unemployment insurance, at least, that's a tough circle to square.
While "generous" is up to the individual to define, unemployment benefits do not wholly substitute for lost income. They rarely even come close. Take, for example, Texas in which the maximum benefit is $454 per week, or just over $23,600 per year. That's less than half of Texas's average income of $55,653 per year and, at $11.35 per hour, is approximately half of what MIT estimates a parent with one child would need to live.
Oh, and recipients pay taxes on these benefits too.
A common argument against spending on unemployment benefits is that they are too expensive, making this form of government spending a poor decision. While it is beyond the scope of this article to argue that unemployment insurance is good for the economy, it's very hard to argue that this spending is unequivocally bad for the economy.
According to the Minneapolis Federal Reserve, "despite years of research, the economic effects of unemployment benefits are poorly understood… [but] the extension of benefits has only a limited influence on macroeconomic outcomes."
There is some data to argue that benefits act as an effective economic stimulus by smoothing consumption and putting money in the hands of people most likely to spend it, but the bigger picture is that this is muddy. We don't know for sure that unemployment benefits help the economy at large, but there's definitely no basis to say that they hurt it.
Speaker of the House Paul Ryan is famous for having once said that "we don't want to turn the social safety net into a hammock." This, similar to the idea that unemployment pays benefits comparable to holding a job, is rooted in the notion that the system discourages people from looking for work while they collect their benefits.
This is generally untrue.
"Extended benefits provide a sizable boost for workers and the economy," found one Brookings Institute study, "but have little negative effect on work incentives and unemployment." While individual results may vary, on average benefits only increase the duration of unemployment by about 0.2%.
People who get benefits do look for work.
"Sometimes you hear that people just don't really want to work," said Andrew Wells, the director of workforce development with the Chicago Urban League. "And sometimes you have people who may not be looking for that particular opportunity. They may be looking for something else."
"But I have yet to see a person who just don't want to work," he added.
It's a common philosophy that someone on unemployment benefits should just take anything he or she can get, but that's not what the system is for. In fact the Department of Labor specifically allows a recipient to turn down job offers that are bad fits for either skill or experience.
We want people working in jobs that they're good at. Making a computer programmer take a job at McDonald's would waste years of skill and training and would reduce her lifetime value overall. Allowing her the time to keep looking for a job that uses her skill is good for her and good for the employer that needs to hire a talented coder. The system isn't designed to force someone into any job that comes along, and for a reason.
"I think one important takeaway from these statistics is that the actual the human experience of losing your job, or just trying to retain your job or find a job, it's not one universal experience," said Barrington. "It depends where you are, on how you're trained. You might be able to hop from one job to another right now and make more money with each move, while in other areas you might be looking at week or months of unemployment."
He noted that it's important to remember that these are statistics that are applied over a large and very diverse work force.
Geography and skills play an increasingly important role in the labor market. For someone who loses his job, finding another doesn't just depend on work ethic and shoe leather. The jobs have to physically be there, and they have to need complementary skills.
For someone in Indiana who can't relocate, a job opening in California might as well be on Mars. The same goes for a welder interviewing to run a SQL server. A person can't go get a job that just isn't there.
College graduates these days are increasingly urged to specialize in STEM (science, technology, engineering and medicine) majors. This is largely due to the belief that an engineer will have a good job while a humanities major can, at best, hope to serve his latte.
The reality is far more muddled.
While STEM majors can sometimes command much higher salaries upon graduation, employment prospects are mixed across the board. For example, a 2014 study out of Georgetown found that the worst major for job prospects was architecture, while fields such as education and social work (fields which depend on traditionally "squishy" liberal arts backgrounds) enjoyed relatively low rates of unemployment. In 2015, according to the Association of American Colleges and Universities, the unemployment rate for humanities majors was 5.4%, a mere 0.8 points higher than bachelor's degree holders overall.
Does that mean abandon STEM? Certainly not. The world could use more good engineers. Just don't ditch Cervantes just because you think he won't get you a job.
Immigration is still one of the biggest talking points when it comes to unemployment. As was discussed in the 2016 presidential election, many Americans are convinced that immigrants coming into the country undercut local wages and take existing jobs.
First, it's important to note that there is some evidence that the H-1B visa program reduces opportunities for skilled labor. However, if it exists, that impact is small.
Overall, however, immigration does not increase unemployment across the board for the same reason that the birth rate doesn't increase unemployment. More workers also means more consumers and participants in the economy. As new people come in they don't just take jobs, they also shop and live and consume, creating opportunities for other jobs overall. If anything, most new research has concluded that the increased economic activity from new immigrants actually creates jobs by growing the economy.
Counterintuitive, perhaps, but true.