Simplified Unemployment Rate Calculation
Jan 12, 2010 11:25pm
The official unemployment rate confuses me. Every one claims it’s fudged. How do you manage it if you don’t measure it correctly?
Seems like a pretty straight forward problem.
The current official unemployment rate is based on people. That’s wrong. Doesn’t account for overworked, unemployed, multiple jobs, shared work, etc.
The correct way is to measure how much work could be done if everyone worked full time (40 hours per week) vs how much actual work is done.
What would that look like? Hmmm…
How many people are capable of working? What I’d call the working age population.
How many hours could they potentially work? Maybe assume 2040 per year.
How many jobs are there? Should be easy to determine from tax receipts.
How many hours are worked? A bit harder. Assume salaried employees are overworked.
Adjust the numbers for students, the disabled, vacations, sick leave, etc.
Plug in the numbers, turn the crank, and voila: a ratio showing actual vs potential hours worked.
Nice and simple.
All the types of unemployment economists (and policy makers) use just muddy the waters.
We definitely have the computing power to figure this stuff out in near real-time.