Real unemployment is double the ‘official’ unemployment rate

How many people are really out of work? The answer is surprisingly difficult to ascertain. For reasons that are likely ideological at least in part, official unemployment figures greatly under-report the true number of people lacking necessary full-time work.

That the “reserve army of labor” is quite large goes a long way toward explaining the persistence of stagnant wages in an era of increasing productivity.

How large? Across North America, Europe and Australia, the real unemployment rate is approximately double the “official” unemployment rate.

The “official” unemployment rate in the United States, for example, was 5.5 percent for February 2015. That is the figure that is widely reported. But the U.S. Bureau of Labor Statistics keeps track of various other unemployment rates, the most pertinent being its “U-6” figure. The U-6 unemployment rate includes all who are counted as unemployed in the “official” rate, plus discouraged workers, the total of those employed part time but not able to secure full-time work and all persons marginally attached to the labor force (those who wish to work but have given up). The actual U.S. unemployment rate for February 2015, therefore, is 11 percent.

Share of wages, 1950-2014Canada makes it much more difficult to know its real unemployment rate. The official Canadian unemployment rate for February was 6.8 percent, a slight increase from January that Statistics Canada attributes to “more people search[ing] for work.” The official measurement in Canada, as in the U.S., European Union and Australia, mirrors the official standard for measuring employment defined by the International Labour Organization — those not working at all and who are “actively looking for work.” (The ILO is an agency of the United Nations.)

Statistics Canada’s closest measure toward counting full unemployment is its R8 statistic, but the R8 counts people in part-time work, including those wanting full-time work, as “full-time equivalents,” thus underestimating the number of under-employed by hundreds of thousands, according to an analysis by The Globe and Mail. There are further hundreds of thousands not counted because they do not meet the criteria for “looking for work.” Thus The Globe and Mail analysis estimates Canada’s real unemployment rate for 2012 was 14.2 percent rather than the official 7.2 percent. Thus Canada’s true current unemployment rate today is likely about 14 percent.

Everywhere you look, more are out of work

The gap is nearly as large in Europe as in North America. The official European Union unemployment rate was 9.8 percent in January 2015. The European Union’s Eurostat service requires some digging to find out the actual unemployment rate, requiring adding up different parameters. Under-employed workers and discouraged workers comprise four percent of the E.U. workforce each, and if we add the one percent of those seeking work but not immediately available, that pushes the actual unemployment rate to about 19 percent.

The same pattern holds for Australia. The Australia Bureau of Statistics revealed that its measure of “extended labour force under-utilisation” — this includes “discouraged” jobseekers, the “underemployed” and those who want to start work within a month, but cannot begin immediately — was 13.1 percent in August 2012 (the latest for which I can find), in contrast to the “official,” and far more widely reported, unemployment rate of five percent at the time.

Concomitant with these sobering statistics is the length of time people are out of work. In the European Union, for example, the long-term unemployment rate — defined as the number of people out of work for at least 12 months — doubled from 2008 to 2013. The number of U.S. workers unemployed for six months or longer more than tripled from 2007 to 2013.

Thanks to the specter of chronic high unemployment, and capitalists’ ability to transfer jobs overseas as “free trade” rules become more draconian, it comes as little surprise that the share of gross domestic income going to wages has declined steadily. In the U.S., the share has declined from 51.5 percent in 1970 to about 42 percent. But even that decline likely understates the amount of compensation going to working people because almost all gains in recent decades has gone to the top one percent.

Around the world, worker productivity has risen over the past four decades while wages have been nearly flat. Simply put, we’d all be making much more money if wages had merely kept pace with increased productivity.

Insecure work is the global norm

The increased ability of capital to move at will around the world has done much to exacerbate these trends. The desire of capitalists to depress wages to buoy profitability is a driving force behind their push for governments to adopt “free trade” deals that accelerate the movement of production to low-wage, regulation-free countries. On a global basis, those with steady employment are actually a minority of the world’s workers.

Using International Labour Organization figures as a starting point, professors John Bellamy Foster and Robert McChesney calculate that the “global reserve army of labor” — workers who are underemployed, unemployed or “vulnerably employed” (including informal workers) — totals 2.4 billion. In contrast, the world’s wage workers total 1.4 billion — far less! Writing in their book The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China, they write:

“It is the existence of a reserve army that in its maximum extent is more than 70 percent larger than the active labor army that serves to restrain wages globally, and particularly in poorer countries. Indeed, most of this reserve army is located in the underdeveloped countries of the world, though its growth can be seen today in the rich countries as well.” [page 145]

The earliest countries that adopted capitalism could “export” their “excess” population though mass emigration. From 1820 to 1915, Professors Foster and McChesney write, more than 50 million people left Europe for the “new world.” But there are no longer such places for developing countries to send the people for whom capitalism at home can not supply employment. Not even a seven percent growth rate for 50 years across the entire global South could absorb more than a third of the peasantry leaving the countryside for cities, they write. Such a sustained growth rate is extremely unlikely.

As with the growing environmental crisis, these mounting economic problems are functions of the need for ceaseless growth. Once again, infinite growth is not possible on a finite planet, especially one that is approaching its limits. Worse, to keep the system functioning at all, the planned obsolescence of consumer products necessary to continually stimulate household spending accelerates the exploitation of natural resources at unsustainable rates and all this unnecessary consumption produces pollution increasingly stressing the environment.

Humanity is currently consuming the equivalent of one and a half earths, according to the non-profit group Global Footprint Network. A separate report by WWF–World Wide Fund For Nature in collaboration with the Zoological Society of London and Global Footprint Network, calculates that the Middle East/Central Asia, Asia-Pacific, North America and European Union regions are each consuming about double their regional biocapacity.

We have only one Earth. And that one Earth is in the grips of a system that takes at a pace that, unless reversed, will leave it a wrecked hulk while throwing ever more people into poverty and immiseration. That this can go on indefinitely is the biggest fantasy.

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36 comments on “Real unemployment is double the ‘official’ unemployment rate

  1. lazycat1984 says:

    Reblogged this on lazycat1984 and commented:
    Shadowstats is a valuable resource on this kind of stuff, but most of the information is behind a paywall. (understandably)

  2. I think we are coming to the end of the era of paid employment. According to the St Louis Federal Reserve, as of Feb 2015 only 62.8 percent of the civilian work force had jobs: http://research.stlouisfed.org/fred2/series/CIVPART/

    Those of us who have ceased working are finding there much more valuable ways to spend our time – growing our own healthy organic food and working to make our local communities more sustainable and resilient.

    • We’ll come to the end of wage work when we’ve come to the end of capitalism. I sure wish I could cease work, but there is the matter of rent, food & etc., and for most people that, alas, is a rather large impediment. We’re going to have to speed up the tempo of change. Until then, selling our labor power for wages or starving is the unfortunate choice most of the world faces.

  3. Alcuin says:

    I find it a bit odd that you are so focused on “work” in this post since the theme of this blog is anti-capitalism. One of the defining characteristics of capitalism is the fact that individuals no longer own their means of production and must sell their labor to survive. Stuart Bramhall has addressed this when she said that people who have “ceased working are finding there are much more valuable ways to spend our time…” Indeed. Working for The Man is nothing to brag about – we should all be looking for ways to reclaim the means of production for our own ends, not for the ends of the capitalists.

    • Swanson says:

      @Alcuin. If growing our own veggies was a challenge to Capitalism’s dominance over the planet B-52s would be flying over community gardens now.

    • Who is it who is “bragging” about working for The Man? Today, we are living in a capitalist economy and must survive within it. And that means selling our labor power in exchange for wages that are a fraction of the value of what we produce. (If this weren’t the case, there would be no profits for capitalists.) Until the time arrives when we live in a better world, we’ll have to endure wage work to survive.

      The inability of so many people to find wage work, or work that pays a living wage, is part of the destructiveness and irrationality of capitalism, and thus a crucial reason for why humanity needs to be rid of it. “Looking for ways to reclaim the means of production for our own ends” requires developing an understanding of why the current organization of production does not work, can not work, and placing everyday manifestations, such as widespread and persistent unemployment, in a larger context of systemic economic irrationality.

      Incidentally, socialism does not mean we won’t have to work any more. The necessities of life are not going to fall out of the sky; we will still have to produce them. We’ll have to work for far fewer hours, and for ourselves, our collective, our community and the greater social good rather than work excessive hours for the private profit of capitalists. But we’ll still have to work. For some of us, growing our own organic vegetables will be part of that work; many more of us living in cities, however, will not be able to do so.

      • Alcuin says:

        I made a poor choice of words when I used the word “brag” in my comment, SD. My apologies. As the “Great Recession” drags on, more and more people will have to drop out of the formal economy to survive. Whether this means growing vegetables, participating in the gift economy, stealing, or manufacturing crystal meth will depend on the individual’s circumstances. I don’t hold out much hope of people taking the time to understand how capitalism negatively impacts their lives, though. People are upset about big corporations and money in politics, but I don’t see them being upset with capitalism. They’re just upset that they aren’t getting what they think is their their fair share.

        • Folks old enough to have been around for the Cold War are still largely captive of the ideologies and “there is no alternative” propaganda of those times; the exceptions, such as you and I, have a big job in countering that with our contemporaries. I took take heart in the fact that younger folks seem much more open to critiques of capitalism.

          So what will folks do as the system fails them? All of the above, depending on an individual’s particular circumstances, as you said. If the Left is absent, the Right will fill the vacuum. So we had all better do more to explain to people what is happening to them; when enough people grasp that that can’t get their share, changes becomes possible.

  4. Joel Meyers says:

    Unemployment is inherent to capitalism. There is never full employment. There is an Orwellian elasticity in which a given percentage of unemployment, I believe it is now 6%, is defined as “full” employment, implicitly conceding that 0% unemployment is ruled out as unattainable.

    Unemployment is rooted in the the fact that capitalism requires that the various enterprises profit. Meaning that they have to take out of the economy more than they put into it. It’s like a poker game where everybody wins.

    OK, capitalism is more complex: Some lose and go out of business, their assets to be swallowed up by the winners or abandoned. But business failures are examples of how capitalism as a closed system is a mathematical absurdity.

    It can be made to work for a time by bridging the gap through credit generation. In fact, that is the Keynesian model, in which capitalist governments use deficits to “spend their way” out of depressions and the tendency toward depressions. The problem there is that the debts build up, and have to be spent down or destroyed, or else the interest on those debts mounts with each new deficit, until it swallows up the entire value creation process, including capitalist profitability itself in non-financial areas.

    A skeptic pointed out this fatal flaw in Keynesian reformism, that it prolongs the crisis but builds toward a more major one in the long run. Keynes responded that in the long run, we’ll all be dead.

    That long run may now have arrived, putting capitalism in “borrowed” time situation. Even the present state of the “Great Recession” is maintained only by quantitative easing, that is essentially printing up play money, with nothing but habit to back it up. In the New Deal 1930s days, the dollar was guaranteed by a 25th of an ounce of gold, and was devalued to a 35th, to enable spending on incentivizing the turnover of industry. Today, Marines guard Fort Knox, mainly keeping secret that there is no gold, at least not commensurate with debt and currency. Japanese imperialists are holding out negative interest rates, paying borrowers to take out loans, and they are still mired in depressed capitalism.

    Government deficit spending and private consumer credit inflation have devoured the supply of gold, silver, and other repositories of real value, so that while there is no guarantee of dollar redemption, a dollar only fetches 1/1178 of an ounce on the market, and that is up from about 1/2,000 of an ounce a few years ago. When Nixon took the dollar off the gold standard back in the early 70s, he compensated by making a deal with Saudi Arabia for OPEC to accept only dollars for petroleum, so that, for example, Switzerland, to buy oil, would have to first convert its francs to US dollars.

    The U.S. promised to cut its domestic oil production, which was finally implemented in the Carter years by the “Windfall Profits” tax, applied at the wellhead.

    Now, with fracking and shale and tar oil extraction, the U.S. is again in heavy production, and the supply-demand situation, plus some political maneuvering, has brought oil prices down well below $60 per barrel, the lowest price in many years. While this temporarily increases the value of the dollar, it may cause the deal to fall apart, and a critical pressure to strip the dollar of anything but the paper upon which it is printed.

    Politically, the Big Oil’s profits are now being sacrificed. Partly U.S. foreign policy is cutting off its nose to spite its face, since the lower oil prices are a means of economic warfare against oil producing countries including favorite enemies such as Russia, Iran, the Arab world, and Venezuela.

    These financial maneuvers can only be carried out on the basis of imperialism and super-exploitation of the colonial world. That dynamic is also jack-knifing on the fingers of U.S. imperialism, as dollars have accumulated with ever growing claims on the U.S. economy from around the world, while manufacturing and tangible, material accumulation inside the U.S. seems weaker all the time.

    Meanwhile, the jobs and the manufacturing apparatus are increasingly exported, which is the obverse side of that same dynamic. The Great Depression was only “solved” within capitalism by the great destruction and market vacuum brought about by World War II. Even so, stocks hadn’t recovered until the mid-1950s. Stocks now are going through the roof, without a basis in the creation and distribution of surplus values. Dividends have become a thing of the past, yet “growth stocks” go through the roof. This is a result of Federal Reserve quantitative easing directed at the banks and stock brokerages to artificially inflate stock prices. In that way, inflation can be pointed to as simulating a healthy capital condition, indexed by rising stock prices.

    To come back to unemployment, this means that for any impact on the economy requires a higher expenditure to buy stock, and without in the absence of dividends (don’t even get started on the derivatives casino), it is done not as an investment but as a speculation, further weakening the central financial base. Unemployment does not look to ease anytime soon, given that dynamic. Manufacturing capacity is gutted. The international competition is competent and growing stronger all the time. Further, technology has created an enormous capacity to produce in each labor hour.

    With socialist economy, it could lead to unprecedented abundance. Under capitalism, it creates a need for capital to produce mainly shortages, lest they glut their markets, all the more, where the potential consumers are either broke, or afraid to fritter away what they still have. It is another reason that capitalism has to be replaced by socialist development, centered around human need instead of private profit, and stabilized in the form of a democratic republic, with a working mass awakened to revolutionary class consciousness and international solidarity against imperialism. A good minimal beginning, regarding unemployment, underemployment, impoverishment, and its combination with life-eating overtime, overemployment and overexploitation, made necessary to earn enough to support a family, may be bringing back the old-fashioned, forgotten, hardly mentioned now demand for a shorter work week with no cut in pay.

    • If sharply lower oil prices are an artificial instrument of U.S. foreign policy to destabilize the economies of countries it dislikes — and that is a big if — it would be aimed at Russia and Venezuela, but not the Arab countries. The policy of low oil prices is dependent on Arab countries, in particular Saudi Arabia, maintaining their output and thus they would have to be on board.

      Saudi Arabia has consistently said its refuses to cut its production because otherwise it would lose market share. Although we wouldn’t expect Riyadh to say, “Yeah, we’re helping the U.S. screw Venezuela,” that reason is plausible. Saudi Arabia certainly has ramped up or cut production for political or other reasons in the past, so it remains a possibility that its continued production in the face of low oil prices is being done for political reasons at U.S. behest.

      But it is also possible Saudi Arabia is telling the truth. Saudi Arabian production costs are low, so pumping out oil at current prices remains profitable there, while current costs render other places with more difficult conditions, and those using expensive techniques, not necessarily profitable. It is possible Saudi Arabia is waiting for high-cost producers to drop out, therefore putting it in a position to grab more market share. So we can see a scenario where nothing more than capitalist competitive dynamics is at work.

      Once again, that does not foreclose the possibility that oil prices really are being manipulated for political reasons; ramped-up U.S. production could be consistent with such a scenario. And there is no question that Venezuela is being set up for attack by the U.S. (which heavily funds the opposition there already and supported the 2002 coup against Hugo Chávez). The direction and intentions of the Bolivarian Revolution is an example that the U.S. desperately wants to stamp out, and as capitalism lurches from crisis to crisis, its lashing out is likely to become worse.

  5. Alcuin says:

    An encouraging video on YouTube: Capitalism is Just a Story. 12,171 views currently.

  6. Alcuin says:

    Have you read this? It’s on the Occupy.com website.

    • An excellent article, both parts. Two passages I highlighted, which together summarize the corrosive ideology of hyper-individualism:

      “Our system of modern capitalism is just one story; it is not the only one there is. It’s not inherent within us. It isn’t some inevitable expression of predefined Human Nature. It was invented by human beings and so human beings can change it. But in order to get there, we first have to engage in some ‘dangerous thinking.’ “

      “Neoliberalism can be summarized by this equation: selfishness is rational and rationality is everything; therefore selfishness is everything.”

      Capitalists would have us believe that (their) boundless greed and selfishness is the natural order of the universe and that it can never be any different. But every system of economics and social relations is a system of human design that can be abolished by humans and replaced with something better.

  7. dafyddbh says:

    Great discussion, as always. I wonder if there isn’t a kind of social engineering going on, specifically to do with the need for soldiers for this country’s endless wars now that the draft is over. High unemployment means more young people looking for other means to get an education, get some experience, etc. I started thinking about this after I overheard two twenty-somethings this week talking about how joining up was probably their best option.

    • It is hard to say what degree is some form of social engineering and what is the natural result of capitalist dynamics. It is not necessary for unemployment to be made artificially higher, since capitalism will do that thanks to the magic of the market. But of course that does not mean there can’t be some manipulation going on.

      There is no question that there is an “economic draft” for the military. I remember Michael Moore, in one of his movies, following two military recruiters. They didn’t bother with the high school where the better-off students were, and concentrated their efforts at the high school with the most low-income students, correctly believing their best chance of ensnaring recruits would be there.

      If joining the military is the best option for twenty-somethings, all the more is the system failing. But a “failure” that funnels young people into the military that keeps the war machine going, without which capital accumulation is impossible.

  8. I doubt that any meaningful percentage of those who have ceased working have the resources to grow their our own healthy organic food and to work to make their local communities more sustainable. Many of these people aren’t even getting basic healthcare, and daily life is a struggle just to survive.

  9. Reblogged this on 4th Dimension and commented:
    “Lies, damn lies and statistics.”
    That wasn’t the main fact here. The main thing from this article I wonder is: is the anemic recovery correlated with the decreasing share of labor income vs. capital income? I’ll bet yes.
    And income inequality has been found to be negatively associated with economic growth.

    • That is why countries around the world attempt to escape their stagnation at home through trying to boost their exports. One common policy in support of that is to undervalue their currency.

      But if someone runs a trade surplus, someone else has to run a trade deficit. Capitalism is a zero-sum game.

  10. fridihem says:

    And heres me almost believing the article……………….I would guess that true figures for those in the USA without a full time job is way over 20%…………….and I also thought that slavery had been abolished……..after all $8 an hour is like a slave wage

    • We can certainly debate what the true unemployment rate is, but the 11 to 19 percent figures I obtained from my research are more than bad enough, especially as the trend is for these figures to rise over time.

  11. […] Real unemployment is double the ‘official’ unemployment rate […]

  12. Why does this story refer to the U-6 as the “real” unemployment rate when the U-6 actually includes employed people? I read this and think the author clearly has a motive that seems to bypass some of the facts underlying the data used…

    • If you need a full-time job and all you can get is 15 hours at Wal-Mart, you are among the effectively unemployed. That is why the ultimate rate, the U-6 and its equivalents in other countries, include that category. Persistent under-employment is definitively a part of the crisis of unemployment under the present stage of capitalism.

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