Strategic Knowledge: Hidden Unemployment and Its Impact

by Michael Haberman on July 19, 2010 · 0 comments


I taught a SHRM prepartion class on Saturday to a new group of students. The first module discussed in the prep course is on Strategic Managment. Part of this discussion centers around environment scanning and one of the areas that all good HR pros should pay attention to is what is currently happening with the current workforce. As part of that discussion I mentioned that unemployment was officially about 9.5% on a national basis and about 10% in Georgia. However, I said that unofficially it was more like 16% because “official” numbers did not count those who had dropped off the rolls and were no longer collecting unemployment benefits nor did it count those who were “underemployed”. These folks include people working part-time jobs. For numbers purposes they are counted as employed, but if you ask them they are not working enough or in their field of expertise. They consider themselves unemployed and are holding a part-time job to help pay bills while looking for “real” work.

Well after having made that statement in class I went home and was reading some news where I discovered an article The Jobless Effect: Is The Real Unemployment rate 16.5%, 22% or …? Author Pallavi Gogoi reports on surveys that have shown that the real unemployment rate may be 22% or even higher. This has led the researcher to question the accuracy of the Department of Labor Statistics numbers and, as the writer reports, this is not the first time. A number of researchers, writers, academics and others have long thought that the government “cooks the books” when it comes to unemployment figures. However, at this time it has potentially devasting consequences. One of these is that lawmakers base their legislative actions on a picture that is less grim than it actually is. Additionally, businesses may ramp up based on such figures only to be disappointed because consumer demand is not there due to the fact that more people are unemployed than was reported.  One writer suggest that one of the reasons that unemployment benefits have not been extended is the much “rosier” 9.5% reported than the actual, near depression level, of 22%.

The research shows that 50% of workers in the US report they have lost a job or suffered some financial impact due to the recession. We all know someone who is out of work and probably know someone who is part of this “hidden unemployement”. As part of the response to this another impact on the laborforce is that many seniors have returned to work, often taking positions that would normally go to teens. As a result unemployment among teens is running two or three times the level of the rest of the workforce. The impact of this has been a reduction in teen spending, a large part of the consumer market. However, another impact is that teens are not learning workplace skills, like showing up on time, that will be necessary for them to be successful in the future.

I am not sure of the appropriate solution or solutions to this problem. When you have politics, social influences, education and money all wrapped up into a problem there will be no easy solution. However…

The lesson for HR professionals is to be aware of what is going on and how it will influence what you and your company do in the coming 6 months to 2 years. How does hidden unemployment, teen unemployment, lack of trust in government reporting, lack of consumer spending and the political arena impact your organization? Being aware of these issues and guiding your company through the minefield will improve your worth and help you avoid joining the ranks of the unemployed.

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{ 7 comments… read them below or add one }

Barbara A Hughes July 19, 2010 at 11:25 am

Really good thoughts, Mike. The way the government and most businesses collect data, analyze it and make pronouncements is often flawed. The government uses "employment" in the old Industrial Age sense of being in front of a machine, on an assembly line and the like. The truth is that the self-employed ranks have grown substantially in the past 20 years and I'm not sure how they (we) are tracked these days. Similarly, those who were out of a job and have decided to become self-employed but are a company-of-one; are they counted. You'd think that with all of the millions of government employees and contractors that someone or something like the Budget Office would have changed how these figures are compiled.
Maybe this is why economists say the US emerged from the recession in 3Q09 but nobody believes it.

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Michael D. Haberman, SPHR July 19, 2010 at 11:51 am

Barbara:
Thank you for your comment. You come up with some very insightful stuff. I had not thought about how independents might be counted. Which they are not. But as we both know many independents are also under employed. Guess I have lived in that world too long.

We all know the old saying that you can use statistics to tell whatever lie you want and since the government is very adept at statistics and lying I would look at every report they produce with a jaundiced eye.

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Barbara A Hughes July 19, 2010 at 12:17 pm

I think it was Benjamin Disraeli who said, "There are lies, damned lies and statistics"!!!

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Michael D. Haberman, SPHR July 19, 2010 at 12:20 pm

Thanks for the dose of cultural literacy. We should all know that quote.. becase it is so true.

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Cathy Missildine-Martin, SPHR July 19, 2010 at 12:27 pm

I also think that the numbers are skewed when employers hire the "new temporary workforce" to perform project work instead of regular full time employees, how to temps, 1099's and independents that Barbara discussed get accounted for? They don't….but I see many clients wanting more smaller projects as they are understaffed….interesting conversation. Thanks Mike

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Sergey Gorbatov July 20, 2010 at 7:38 pm

Michael, I would like to assume a pragmatic position on the issue. Unemployment is largely the area of interest of Macroeconomics and not so much HR. It is true that there are direct implications on your current workforce (less turnover, higher concerns over job losses, etc.) and strategic implications (e.g. building talent pipeline by accessing the unemployed today), and it it exactly what should concern a practicing HR manager rather than ruminations on the exact percentage number or governmental reporting practices.

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Anonymous July 21, 2010 at 10:51 pm

Michael, It was a pleasure meeting you and your wife a couple of weeks back. A good time was had!!! Strange enough you were right, I am back on the unemployment line. Leaving me being a statistic. I mean, here I am trying to protect the compnay from lawsuits because of wrongful terminations and I found myself building a case because I knew eventually I would be one of those individuals. I've notice that private companies have no reservation when terminating their employees. Because being compliant with federal regulations isn't as important to the growth of their businesses, paying out unemployment benefits seems to be less costly than having quaility employees. Especially in GA…

I agree that the 22% rate is more likely. Yeah, because the department of labor can't keep up with the numbers. Nowadays there are jobs out there but, those individuals looking for a "career" won't just settle for any old job. By the time numbers are gathered for 1 quarter and individuals are employeed, those same individuals in the next qaurter are back out there looking for work again. The impact, I think the impact is costly and in the long run retention is key. C.Cunningham

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