The study shows the underemployment rates among those 16+ who were employed in 4Q-2009 for each 2008 income decile (Table 1). It ranges from 1.6% in the top income decile to 20.6% in the bottom one."We ranked the household incomes of all households in the U.S. in 2008 in ascending order and calculated the cutoff points for each decile (ten percent) of the income distribution (See Appendix A). The bottom decile included all households with annual incomes at or below $12,160 while the top decile was comprised of all households with pre-tax, annual incomes above $138,800.
We then assigned each employed person in the October-December 2009 period into the 2008 household income decile that came closest to matching their reported household income on the 2009 CPS interview."
Table 3 shows the 4Q-2009 Unemployment Rate and Underemployment Rate by 2008 income decile.
"The underutilization rate for workers in any income group can be interpreted in the following manner: for every 100 members in the adjusted civilian labor force in the fourth quarter of 2009, how many were left unemployed, underemployed, or a member of the labor force reserve."
"The unemployment rates of workers in the fourth quarter of calendar year 2009 varied extremely widely across the ten household income deciles.8 Workers in the lowest income decile faced a Great Depression type unemployment rate of nearly 31% while those in the second lowest income decile had an unemployment rate slightly below 20% (Table 3 and Chart 2). Unemployment rates fell steadily and steeply across the ten income deciles. Workers in the top two deciles of the income distribution faced unemployment rates of only 4.0 and 3.2 percent respectively, the equivalent of full employment. The relative size of the gap in unemployment rates between workers in the bottom and top income deciles was close to ten to one. Clearly, these two groups of workers occupy radically different types of labor markets in the U.S."
Table 4 is the most striking. It shows, by income decile, the number of unemployed people, underemployed people, and the "labor force reserve" -- those who would like to work, but are not considered part of the labor force. It also shows an "adjusted labor force" total and calculates an underutilization rate for each decile. Take a look, and ponder it for a while:
Table 4: The Number of Unemployed and Underemployed Persons, Members of the Labor Force Reserve, the Pool of Underutilized Labor, and Labor Underutilization Rate by Decile of the Household Income Distribution, 4th Quarter 2009 Decile 2008
Income
[from Appendix
Table A]
(A)
Unem-
ployed(B)
Under-
employed(C)
Labor
Force
Reserve(D)
Under-
utilized
Pool(E)
Adjusted
Labor
Force(F)
Under-
utilization
RateLowest $12,160 or less 2,523,484 1,172,379 869,399 4,565,292 9,093,930 50.2% Second $12,160 – 20,725 1,377,456 1,005,855 488,993 2,872,304 7,700,944 37.6% Third $20,725 – 29,680 1,885,492 1,330,302 642,565 3,858,359 12,958,122 29.8% Fourth $29,680 – 39,000 1,686,509 1,012,634 527,184 3,226,327 14,342,149 32.5% Fifth $39,000 – 50,000 1,018,953 632,966 350,506 2,002,065 11,726,027 17.1% Sixth $50,000 – 63,000 925,351 594,148 311,318 1,830,817 12,169,020 15.0% Seventh $63,000 – 79,100 972,009 622,585 29,492 1,894,0367 15,456,882 12.2% Eighth $79,100 – 100,500 875,080 599,808 308,478 1,783,366 17,882,399 10.0% Ninth $100,150 – 138,700 650,691 388,038 246,145 1,294,879 16,689,379 7.8% Top $138,700+ 353,899 174,407 156,885 689,195 11,301,726 6.1% All (1)
14,698,791 8,915,147 5,360,039 28,974,310 158,787,138 18.5% (1) Note: The totals for “All” include persons with missing household incomes on the October/December 2009 files.
Findings on the estimated sizes of the unemployed, underemployed, and labor force reserve groups can be combined to estimate the overall labor underutilization rates for workers in each of the household income deciles.11 The calculations for the underutilization rates for each income group are displayed in Table 4 and for selected decile in Chart 5. The range in these labor underutilization ratios is extremely wide as one would have expected given the huge gaps in each form of underutilization between the bottom and top deciles of the income distribution. The underutilization rate for workers in the lowest decile was slightly over 50% and remained just under 38% for those in the second lowest decile. These extraordinarily high rates of labor underutilization among these two income groups would have to be classified as symbolic of a True Great Depression. Workers in the two deciles in the middle of the distribution (the fifth and sixth) faced underutilization rates of 15 to 17 percent, representative of a severe recession. In substantial contrast, workers in the top two income deciles encountered underutilization rates of only 6 to 8 percent. Given their very low official unemployment rates of 3.2% and 4.0% for the top and second highest deciles respectively, one would have to characterize their labor market situation as a near “full employment environment.11 One cannot simply add the three percentages in Table 4 to generate an underutilization rate since the denominator of the three ratios are somewhat different for each measure. The unemployment rate is based on the official civilian labor force, the base for the underemployment rate is the number of employed, and the labor force reserve is based on the adjusted civilian labor force.
Here are the final two paragraphs of the study:
At the end of calendar year 2009, as the national economy was recovering from the recession of 2007-2009, workers in different segments of the income distribution clearly found themselves in radically different labor market conditions. A true labor market depression faced those in the bottom two deciles of the income distribution, a deep labor market recession prevailed among those in the middle of the distribution, and close to a full employment environment prevailed at the top. There was no labor market recession for America’s affluent.
In testifying before a Congressional committee in the late 1960s on the need for a sub-employment index to capture the high variations in labor market conditions in different neighborhoods and local labor markets, Secretary of Labor Willard Wirtz was asked how workers were doing on “on average”. He reportedly replied, “When you have your head in the freezer and your feet in the oven, on average you are doing Ok.” Similar remarks apply to the state of American labor markets today. Who will tell the people? Does anybody care?
As this blog has pointed out, when it comes to income, most of us are below average. Lake Wobegon in reverse.
I am reminded of Henry George's statement:
It is as though an immense wedge were being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down.
Look at Table 4. What do you see?
Bob Herbert's column on this study ends with this:
Those who believe this grievous economic situation will right itself of its own accord or can be corrected without bold, targeted (and, yes, expensive) government action are still reading from the Ronald Reagan (someday it will trickle down) hymnal.
I think there is a better way. I think it can be found in the ideas of Henry George. Let's not make the situation worse by trying to aid those who are affected without going to the root of the problem. Seek the root, and eradicate it. Don't hack at the leaves.
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