The Measurement of Unemployment: An Empirical Approach

Abstract

Although the rate is one of the most widely cited and closely monitored economic statistics, the definition and measurement of remain controversial. An important issue is whether non-employed persons who display a marginal attachment to the labor (for example, those who are available for and desire work but are not searching for work) should be classified as unemployed or non-participants. Although this issue has been extensively debated, it has never been tested empirically. This paper carries out empirical tests of this and related hypotheses using a unique longitudinal data set from Canada. We find within the marginally attached a waiting group whose behavior indicates that they would be more appropriately classified as unemployed rather than force. The remainder of the marginally attached exhibit behavior between that of the unemployed and the balance of non-participants, suggesting that the desire for work among non-searchers conveys substantial information about labor attachment and future employment status. Our methods also apply to heterogeneity within the unemployed, and we investigate behavioral variation linked to differences in job search methods and reasons for entry into unemployment. Although those using job search do exhibit behavior somewhat distinct from active searchers, our results reject the practice of classifying passive job searchers as force. Overall, our results indicate that the non-employed are very heterogeneous, so that any single division into unemployment and out-of-the-labor force is unlikely to fully capture the variety of degrees of labor attachment.(This abstract was borrowed from another version of this item.)