# data[].attributes.body
It's the moment to discuss about the unemployment rate?

# data[].attributes.headline
The 'lie' behind the unemployment numbers

# data[].attributes.subject
The 'lie' behind the unemployment numbers

# data[].attributes.body
July 2017, J. Edwards.
"My point was that it is not helpful for the government to announce that we have low "unemployment" when in the real world actual unemployment may be three or four times as high as the official rate."
(full article, here)

# data[].attributes.attachment_link.readable_text
LONDON - Last week, I published a column arguing that the official definition of "unemployment" used by the UK government masked the true level of joblessness and under-employment in the economy by ignoring a large number of people who don't have jobs.

It was titled, " Unemployment in the UK is now so low it's in danger of exposing the lie used to create the numbers."

My point was that it is not helpful for the government to announce that we have low "unemployment" when in the real world actual unemployment may be three or four times as high as the official rate.

I was surprised, and delighted - and then dismayed - when three people whose work I respect all took issue with it on Twitter: Mike Bird a writer for the Wall Street Journal (who also used to write for Business Insider); Richard Clegg of the Office for National Statistics, who compiles unemployment data; and Danny Blanchflower, the economist and former Bank of England monetary policy committee member who now teaches at Dartmouth. You can read their objections here, here, and here.

Blanchflower called me " silly" and "ridiculous."

ridiculous
- Danny Blanchflower (@D_Blanchflower) July 24, 2017

Clegg said I was wrong to suggest that the ONS was misleading people. And Bird argued that labour market "slack" has always been defined in a way that excludes it from the headline unemployment number.

So, feeling wounded, here is my second attempt to explain why it is worth examining exactly how "unemployment" is defined by economists, and why I referred to it as a "lie" in my headline.

My intention was to unpick some of the technical arcana that goes into the creation of the Office for National Statistics' calculation of unemployment in Britain. (Exciting stuff, I know!)

The official unemployment rate in the UK right now is 4.5% - a record low. But, as the ONS makes clear, that number doesn't count part-time workers who want full-time jobs, "inactive" workers alienated from the workforce, people who retire, students, or those who work in the home. Once you wrap all those people in, the number of jobless people is actually 21.5% of the workforce, according to the ONS. ( US unemployment numbers are calculated in a similar way.)

People who have studied economics are very comfortable with the idea that official "unemployment" might be 4.5% even though the real rate of joblessness is four times that, 21.5%.

But ordinary folk in the real world are not that familiar with this distinction.

Twitter/Danny Blanchflower

Economists, the government, and the media tend to refer only to the headline unemployment rate.

The adjoining mass of inactive, under-employed, and unemployed people gets relatively little airtime (although the perils of the "gig economy" are bringing some of that to light).

"The statistical definition of 'unemployment' relies on a fiction that economists tell themselves about the nature of work," I wrote, because "economists have agreed on an artificial definition of what unemployment means."

Obviously, not all the "inactive" people actually want jobs, (students, new parents with babies, etc.). But, as this chart from Samuel Tombs of Pantheon Macroeconomics shows (below), even if you strip out the inactive people who don't want to work you're still left with "inactive" people who do want to work, plus part-time workers who really want full-time jobs.

Add those to the official unemployed definition - active workers without jobs who are actively seeking work - and you get a real-world unemployment number of about 14%. That's three times the official rate:

Pantheon Macroeconomics

More data on the UK's chronic underemployment problem here.

More worryingly, the percentage of underemployed part-time workers and the percentage of inactive people who want to work has remained at roughly 10% over time.

Now, one interpretation of that is to say, "well, these people don't really want to work, and the fact that the phenomena continues through boom and bust proves they don't want jobs. Therefore it's ridiculous to count them as unemployed."

But I think Tombs is on to something here. His data filters out the inactive people who don't want work, and he still gets to 14%. More interestingly, there has been a big switch in who is an inactive worker. It used to be that women were inactive - because they were wives and mothers who stayed at home. But in recent years they have moved into the workforce in ever greater numbers. The inactive rate for women has dropped from about 45% to 26.4%.

Men, by contrast, are dropping out of work (or being forced out) into ever-greater levels of inactivity. As this chart from ONS shows, and the rate for men has tripled from somewhere near 5% to 16.4%:

Pantheon Macroeconomics

Those data strongly suggest that "inactive" workers are not a monolithic core of people who just don't want jobs. Rather, its members are being drawn in, or pulled out, of work depending on how our culture changes. The nature of inactivity changes depending on the job market. It's not fixed, it's fluid. That is why it is more like unemployment than not, and why I think it is misleading to ignore inactivity in the official number.

That's why I called the headline unemployment rate a "lie" in my original story.

I wasn't literally accusing the ONS of cooking the books.

Rather, I was suggesting that headline unemployment is a misleading way of talking about unemployment, and it creates a gap between what experts - like Bird, Clegg, and Blanchflower - understand as "unemployment" and how ordinary people actually experience it in the real world. (I was also hoping that most people would see the word "lie" as a rhetorical flourish. Perhaps, on Twitter, such subtlety was over-optimistic.)

It's ridiculous to tell voters that there is full employment when one out of every five people you know doesn't work, and three out of every 20 need jobs. Brexit, Trump and Corbyn are obvious reactions to this mismatch.

That's why it's worth shining some light on how economists actually do their work.

NOW WATCH: Trump once won a lawsuit against the NFL - but the result was an embarrassment

# data[].attributes.attachment_link.title
More on the 'lie' behind the unemployment numbers

# data[].attributes.attachment_link.description
LONDON - Last week, I published a column arguing that the official definition of "unemployment" used by the UK government masked the true level of joblessness and under-employment in the economy by ignoring a large number of people who don't have jobs.

# data[].attributes.headline
A guide to a correct reading of employement data

# data[].attributes.subject
A guide to a correct reading of employement data

# data[].attributes.body
June 2017,
"In a period of ever-increasing unemployment, we are overwhelmed by employment statistics. But we are sure that all these figures give us a correct perspective?"
(full article, here)

# data[].attributes.attachment_link.readable_text
To interpret employment data accurately, also the inactive are to be taken into consideration. If unemployment falls, it does not necessarily mean that there are more employed people. It is in fact possible that unemployment decreases due to the effect of an increase in the rate of inactivity, i.e. when individuals stop actively searching for a job, owing to discouragement. In the same way, if unemployment soars, the number of employed people could remain unchanged. A rise in unemployment may be accompanied by a reduction of inactive seekers. This could be good news, since people first discouraged may have started looking for a job again.

Also for the youth unemployment rate, referred to the age groups ranging from 15 to 24 years, the percentage should be related to the number of job seekers. A youth unemployment rate at 34% does not indicate that 34% of the youth in Italy do not have a job. In this age group the calculation of the unemployment rate does not consider by definition inactive seekers, since in most cases they are still completing their education. The incidence of young unemployed people on the total of young people of the same age group is instead of approximately 9 per cent. This means that less than a youth in ten in Italy is unemployed.

We should also take into account the difference between ISTAT and INPS data. ISTAT data are based on a sample survey of the labour force, acquired on a monthly basis, with quarterly and annual trends. INPS data instead take into account mandatory communications sent by companies when they hire or dismiss a worker and are a useful tool to study the patterns of the different types of contract. The two sources complement each other. They should be both analysed without being juxtaposed. This is another trick used by those who misread data.

# data[].attributes.attachment_link.title
What is the difference between an inactive and an unemployed person? A guide to a correct reading of employment data

# data[].attributes.attachment_link.description
To interpret employment data accurately, also the inactive are to be taken into consideration. If unemployment falls, it does not necessarily mean that there are more employed people. It is in fact possible that unemployment decreases due to the effect of an increase in the rate of inactivity, i.e.

# data[].attributes.headline
Joseph Stiglitz: “Unemployment is not a fate"

# data[].attributes.subject
Joseph Stiglitz: “Unemployment is not a fate"

# data[].attributes.body
June 2017, interview
"we have to restore the worker’s central importance in decision-making and management processes"
(full interview, here)

# data[].attributes.attachment_link.readable_text
Can we cut into growing inequalities, while limiting their expansion and reducing their social impact, by acting upon the employment lever? For the 2001 Nobelist in Economics Joseph Stiglitz, the answer is yes. But a yes not out of convenience, but of necessity. "Inequalities have grown exponentially," explains Stiglitz. There are those like Thomas Piketty, director of École des Hautes Etudes, who believe that inequality is an endemic phenomenon that can be blamed on capitalism as a whole, and those who, like Stiglitz, believe that inequalities are a consequence of political and macroeconomic choices, and not a "natural" outlet of this system. This is why work becomes the place where, instead of fostering stagnation that maximizes the profit of the few (very few, actually), it is necessary to trigger a generative and participatory process that has a deep and positive impact on income, career possibilities, and social mobility. Italy, professor Stiglitz says, is "one of the countries with the highest levels of inequalities in the world." For once, the United States is not so distant from us: "a middle class picked clean, an impoverished population base, and 1% of the population enjoying extra profits. And the children of this 1%, who will be rich by mere "descent," will inherit a competitive edge that will only lengthen the chain of inequalities. Something is not right, something is not fair. Maybe nothing is. From the theoretical standpoint, a model has exploded, Stiglitz explains: that of the "trickle-down theory," or the idea that inequalities- of well-being, health, income, and social opportunities - might in some way be mitigated by the fact that the benefits received by the wealthier population trickle down onto the lower classes in terms of employment and so on. To the contrary, continues the Nobelist, whom we met at Fondazione Feltrinelli in Milan on the sidelines of a conference promoted by Adecco, "growth in recent decades has been soaring, and has been entirely pocketed while sharing nothing. A worker's minimum wage is lower than 40 years ago," in the United States and Italy alike.

In your recent study, you spoke of the urgency of rewriting the rules of economics in order to get out of the spiral of inequality into which the European countries are precipitating. From the standpoint of work, what does this involve?
When we speak of work, we speak of employment, but that's not enough. Beyond the objective of full employment, which I suggested considering a priority starting from the reform of monetary policy, we have to restore the worker's central importance in decision-making and management processes. In order to reduce inequalities and recalibrate compensation and income levels more fairly, we have to give workers a voice in the matter and a capacity for real influence over the working processes. For a company's success, the contribution of the workers is essential. This is why they're saying their piece, and it is just as right that they get their fair share, through a salary consistent with the value they help generate.

Other interventions that might rewrite the rules of economics starting from work?
First of all, breaking down the legal barriers to access to work that still exist, particularly for women. Then, minimum wages must be raised, and a legal framework in line with the new places and conditions of work - which must not be brought downward - must be guaranteed.

And then?
Reform the justice system to reduce detention rates, reform immigration laws to foster access to citizenship, approve regulations on family leave, increase family allowances, and promote services for childhood and top-flight higher education for all.

On a number of occasions, you have declared yourself optimistic about the possibility of changing course. Are you still?
Since we are beings capable of choice and we understand things are going wrong, I'm an optimist: we know how to choose, we have to choose, but we must also understand in what direction to direct this choice. Inequalities are not inevitable and unemployment is not a fate. Work must, however, be the place where these inequalities fade, and a guarantee for social mobility. If it becomes a place of inequality and discrimination, we are in a new era of feudalism.

So where should our choice be directed?
We have to fight inequality in every way. To do this, we have to rewrite the rules of the market, guaranteeing a better distribution of income, strengthening the bargaining power of workers, and reducing the gap between management compensation and the workers' average salaries. Today, the system guarantees the accumulation of financial wealth and in fact discourage investment in the real economy, in infrastructure, and in support of small and medium-sized enterprises. We have to go in another direction, in terms of both rules and of corporate governance.

How can the third sector contribute to this reconfiguration of the economy?
By doing what it knows how to do, and doing it better. Let's take the case of the United States: if you observe American institutions - if you look at them well, I mean - what do you notice? You notice that the most successful ones are nonprofits. And among these institutions, universities are particularly successful. If you look at universities like Harvard, foundations, and associations that truly have a positive economic and social impact, they're all nonprofits. When people speak of the market economy, I say we're not a true market economy. We aren't one in the United States, where the entire education sector, from Stanford University on down, is governed by a non-profit system. And you aren't one in Italy where - and I don't have to tell you this - the third sector has a pre-eminent role. It would be a disaster were it to explode.

I'm talking about politics. Inequality is a consequence of a choice by the political system. Since Germany has an imposing weight, it throws it around. It is necessary to reform the rules of the Eurozone, by sharing debt, erasing the fiscal compact, and going back to favouring public investment

Let's get back to Italy and labour policies...
The problem is the Eurozone, for how it was configured. Intervening in terms of flexibility will not lead to much, also because in the countries inside the Eurozone that tried to increase flexibility, the only result has been to weaken the economy's domestic capacity even further.

If we're saying "Eurozone," we're basically saying "Germany"...
Within the euro, for young Italians it's very difficult to be fully employed; it would be easy for Germany to change its policies, for Europe to change, and when I say "easy" I'm not referring to economic policies. I'm talking about politics. Inequality is a consequence of a choice made by the political system. Since Germany has an imposing weight, it throws it around. It is necessary to reform the rules of the Eurozone, by sharing debt, erasing the fiscal compact, and going back to favouring public investment. Without proceeding in this direction, there's no getting out of the mass unemployment problem which, according to the ECB, in the euro area, stands at 18.5%.

A consequence of this policy, and of this iron cage of the Eurozone, is that, in Italy, 7.6% of the population today lives in conditions of absolutely poverty.
Not only. While the countries most virtuous in terms of income, struggle against inequality, and social mobility are Norway (which is outside the Eurozone) and Sweden, Italy is in first place in the world in terms of rate of inequality, income gap, and social immobility. In Italy, as in the United States, you have a high income if you are born in a high-income family. Just like the United States. This is why if the Eurozone is a trap, the United States is by no means the model to follow.

We run the risk, also in employment issues, of being like Baron Münchhausen, who wanted to pull himself out of the swamp by his own hair
So much in fact that, in Italy, there is underinvestment, including cultural underinvestment, in research policies. Researchers are not finding work, and are fleeing abroad. Those that could be giving this country so much are forced into conditions of permanent precariousness and suffer inequalities bordering on humiliation. So we're right back where we started. Instead of invoking austerity or following recipes imported from who knows where, it would be no small thing to seek to redraw the boundaries of the economy by giving impetus to the third sector, to its capacity to act upon the social bond. If we don't restart from this engine, it will be difficult. If we wish to rewrite the rules and redefine the shape of the economy, we have to start from work and remember we have alternatives to crisis, to austerity, to growing inequality. One of these alternatives is to learn from nonprofits how real social change is made.

Stefano Micelli: "Part humanist, part programmer - this is the craftsman of the future"

Stefano Micelli: "Part humanist, part programmer - this is the craftsman of the future"

Interview with the author of Futuro Artigiano: "Schools are essential: Sweden' secondary technical schools churn out ...

Inspiring Best Practice

Mr. Amazon's disruptive future

Mr. Amazon's disruptive future

Since creating the first e-commerce platform focusing on books more than twenty years ago, Jeff Bezos has revolutioni...

Innovation Digital Transformation

# data[].attributes.attachment_link.description
Can we cut into growing inequalities, while limiting their expansion and reducing their social impact, by acting upon the employment lever? For the 2001 Nobelist in Economics Joseph Stiglitz, the answer is yes. But a yes not out of convenience, but of necessity. "Inequalities have grown exponentially," explains Stiglitz.