Academic journal article Monthly Labor Review

International Unemployment Indicators, 1983-93

Academic journal article Monthly Labor Review

International Unemployment Indicators, 1983-93

Article excerpt

Seven unemployment indicators, known as U-1 to U-7, for nine major industrial countries were presented in the March 1993 issue of the Monthly Labor Review.(1) The data in the initial analysis covered just the year 1989. The indicators have a large cyclical component, and international relationships might change, depending on the phase of the business cycle in each country. To investigate these relationships further, this article presents data for a series of years, spanning relatively high and low unemployment periods from 1983 to 1993.

The sequence of indicators U-1 to U-7 illustrates a range of unemployment measures going from a very narrow to a very broad view. Under this framework, U-5 is the of ficial, usually cited U.S. unemployment rate, referred to as the conventional measure here. U-1 through U-4 narrow in on certain types of unemployment that reflect parts of U-5, while U-6 and U-7 portray broader concepts of underutilization than U-5, respectively bringing into consideration persons working part time for economic reasons and discouraged workers.

In general, this article reinforces the findings of the 1993 one. The principal finding of that study was that Japan and Sweden, the countries with the lowest unemployment rates as conventionally measured, had by far the largest increases when the definition was expanded to include persons working part time for economic reasons and discouraged workers. This continued to be the case. The current study shows that, in times of recession and recovery alike, the Japanese unemployment rate consistently tripled when these additional measures of underutilization of labor were incorporated. For Sweden, the most inclusive indicator more than doubled until 1992-93, when labor market conditions deteriorated drastically and the conventional rate jumped sharply, resulting in some closing of the differential between the conventional and expanded rates.

Sweden's unemployment rate, which was the lowest of all countries in the earlier study, has subsequently risen to unprecedented postwar levels due to a severe recession. In 1993, Sweden's unemployment rate of 9.3 percent, as conventionally defined, surpassed the U.S. rate for the first time. Understanding the effect of Sweden's pioneering programs for retraining and employing the unemployed is important to gaining an appreciation of that country's labor market situation. The addition of persons in labor market programs further increased Sweden's already high 1993 conventional unemployment rate to 14 percent. Of course, other countries have persons in labor market programs, but their proportion of the labor force is small compared with Sweden's.

In the earlier study, Sweden maintained the lowest rates for most of the indicators, even when labor market program participants were added. GIn In this new study, Japan replaces Sweden as the country with the best labor market performance across the entire spectrum of indicators in 1992-93.

Another way of looking at the data is to present them in the form of three elements of labor underutilization: unemployment, part-time work for economic reasons, and discouragement with the labor market. Such a classification shows that unemployment is the largest of the three in all of the countries studied except Japan and Sweden. Thus, for these two countries, standard unemployment comparisons miss a great deal of labor force underutilization. Also, ranking the countries according to total labor underutilization rates differs from ranking them according to unemployment rates. For example, Italy was in the middle of the range of unemployment rates, but had the highest rate of total labor underutilization.

Data for Australia, which was not covered in the earlier study, are included in this article. For Germany, the earlier study referred to the former West Germany. In the present study, data for West Germany continue to be presented until 1992, when the coverage changes to unified Germany. …

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