Monday, February 15, 2010

Labor Underutilization Rate by Household Income

by Bill McBride on 2/15/2010 01:52:00 PM

The following chart is based on data from a research paper by Andrew Sum and Ishwar Khatiwada at the Center for Labor Market Studies, Northeastern University (ht Ann):

"Labor Underutilization Problems of U.S. Workers Across Household Income Groups at the End of the Great Recession: A Truly Great Depression Among the Nation’s Low Income Workers Amidst Full Employment Among the Most Affluent"

Update: Bob Herbert at the NY Times wrote about this paper last week: The Worst of the Pain and so did Ryan McCarthy at Huffington Post: 'No Labor Market Recession For America's Affluent,' Low-Wage Workers Hit Hardest: STUDY

Labor Underutilization Rate by Household Income Click on graph for larger image in new window.

This graph shows the labor underutilization rates by household income based on the author's research and calculations.

"At the end of calendar year 2009, as the national economy was recovering from the recession of 2007-2009, workers in different segments of the income distribution clearly found themselves in radically different labor market conditions. A true labor market depression faced those in the bottom two deciles of the income distribution, a deep labor market recession prevailed among those in the middle of the distribution, and close to a full employment environment prevailed at the top. There was no labor market recession for America’s affluent."
emphasis added
A few notes:
  • The number of workers in each income group is not the same. Ranges were chosen based on available data. Actual income decile boundaries are provided in Appendix A of the paper.
  • The three categories of labor underutilization are:
  • Unemployed
  • Underemployed
  • Labor force reserve or hidden unemployment: "workers who express a desire for immediate employment but are not actively looking for work and thus are not counted as unemployed."
  • The authors calculated the total labor underutilization rate at 18.5% at the end of Q4 2009. The BLS reported U-6 at 17.3%, so this is somewhat higher rate than the BLS measure of "Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers"

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