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The Great Recession: 34 million workers struggle to survive

By Ronald R. Cooke
web posted November 16, 2009

As I expected, this recession has now pushed unemployment in the United States to more than 10%.  Mass layoffs continue.  Unemployment has not been this bad since 1983.  Although job loss may abate through the end of this year, do not be surprised if escalating unemployment continues into 2010.  A record 5.6 million workers have been unemployed six or more months.  In September 2009 there were – on average - a total of 6.3 unemployed persons per non-farm job opening.   In September of 2007, there were only 1.6 unemployed workers per opening.  Not only has unemployment doubled since this recession began, available job opportunities have decreased by almost 50% according to data from the Bureau of Labor Statistics (BLS).

But the official Department of Labor (DOL) unemployment data does not tell the whole story. Millions of Americans have dropped out of the labor force, or are counted as employed even though they have seen a reduction of income. We need a better measure of  income loss.

Let's start with BLS statistics for October, 2009:

The Unemployment Rate

America has a Civilian noninstitutional population (A-1) of: 236,550,000
The participation rate (people who want to work) (A-1) is:  153,975,000
Workforce as a percentage of civilian population: 65.09%
The number of people who are actually employed (A-1) is: 138,275,000
The number of employed divided by the total population is: 58.45%
The number of people in the workforce who are unemployed (A-1) is: 15,700,000
And that yields an unemployment rate of: 10.20%

Now let's calculate the rate of Underemployment.  We want to include the people who have dropped out of the labor force, and thus have no income, as well as the people who are working, but have reduced income because they are working less than 35 hours per week.


The number of people in the workforce who are unemployed (A-1) is: 15,700,000
The number of people who have dropped out of the labor force is: 2,373,000
Those who are now working less than 35 hours per week (A-5): 9,284,000
Total Underemployment is: 27,357,000
As a percentage of the workforce: 17.77%

Unfortunately, we are not done. As we have seen, just because someone is working does not mean they are making enough money to pay their bills.  The largest single category of workers who have a diminished income during a recession are those of us who are self employed.

According to the U. S. Census Bureau, which bases its estimates on IRS tax return data, there are 21, 708, 021 nonemployers (government speak for self employed persons). Included are 19,089,091 Individual Proprietorships; 1,189,998  Partnerships; and 1,428,932  Corporations with no employees. It would appear this characterization is more accurate than the data used by the DOL.

Who are the self employed? We are private contractors, construction workers, skilled trades people, artists, consultants, doctors, lawyers, farmers, accountants and so on. Eighty percent of us need to work in order to support ourselves and our families. Reference 3.

According to Pew Research Center, 40% of self-employed workers say their family income either falls short of meeting their basic living expenses or are barely getting by. It is highly likely that percentage will increase as the Great Recession drags on.

This is an important number for those who want a true measure of worker income loss.  By my calculation, using Pew data and other research resources, and adjusting for self employed workers who are not a primary source of family income, it would appear 6,987,700 self employed workers (32.2%) are not making enough money to pay family expenses. If we add nonemployer firms with deficient incomes to our total underemployment calculation, then 34,344,700 workers have no income, or are struggling to survive on a reduced income. That's 22.3% of the American workforce.

Why is this number important? Aside from its use as a measure of human misery, it also gives us an indication of how many consumers are being forced to curtail their spending.  Over 34 million workers, and their families, are living on a restricted budget. Looking ahead, it would appear the number of workers who will be forced to curtail their spending will increase. We are in danger of experiencing a situation where growing unemployment feeds on itself. As the number of workers who must restrict their spending increases, the funds available for discretionary spending stalls or decreases, reducing potential supplier revenues, encouraging suppliers to lay off more workers, which – increases the number of workers who must restrict their spending. Employers tend to schedule fewer hours of work, place additional workers on part time employment, and find ways to eliminate jobs. Self-employed persons find it increasingly difficult to find productive work. Earning power continues to erode.

Unlike prior recessions, Americans will have a tougher time financing any increase in spending by borrowing against their home equity or credit cards. We may have to wait for solid gains in the job market before prosperity returns to America. Bottom line: job growth must be the number one priority for Congress and the Obama Administration.

But it is not. Perhaps we should be asking these people in Washington: "Why aren't you focusing your attention on job growth?" ESR

Ronald R. Cooke is the proprietor of The Cultural Economist.


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