Dropping out of workforce, underemployment also factors
Economists and observers alike eagerly await the unemployment rate statistics released by the Bureau of Labor Statistics every month. The most recent release pegged the rate at 6.6 percent nationally, and 6.4 percent in South Carolina. To many, the unemployment rate is seen as the one of the most important statistics in evaluating the overall strength or weakness of an economy. This high regard for the unemployment rate is not without its flaws, however.
The unemployment rate does not take into account people who are working in jobs for which they are overqualified. For instance, a person who graduates from college and is working at a movie theater while they search for a job that better fits their college degree is counted the same way as a person who graduates from college with an engineering degree and is employed as an engineer. In addition, it only takes into account those who are actively looking for work. Someone who spent an extensive amount of time looking for work, only to quit out of discouragement is counted as being out of the labor force, rather than unemployed, even though they would prefer to be working. This factor can mislead people when comparing unemployment rates between states or countries.
Even if these factors were accounted for in the unemployment rate, it still wouldn’t be a perfect measure of economic well being. A good example is Canada which has an unemployment rate of 7 percent, higher than that of the U.S., however according to the World Bank, it has a higher per capita GDP. This means that comparisons between different economies is more complex than simply looking at a single statistic.
In addition, unemployment isn’t necessarily a bad thing. In the case of technological innovation, people are continually losing their jobs to computers or machines that perform the same function cheaper than a human can. The agricultural industry is one of the best examples of this. Nearly 200 years ago, in 1820, 72 percent of Americans worked in agriculture, compared to the less than 2 percent that are in that line of work today. However, even though there was a 70 percent decline in farming occupations, there was not a subsequent 70 percent increase in the unemployment rate. This is because those people who used to work in agriculture, or who would have been farmers instead learned new skills and found other jobs.
A more recent equivalent would be the self-checkout lines at the grocery store. I’ve heard many people say that they don’t like using them because they take away jobs from people. That is true on any store level, however, looking at it more broadly, they are good for the economy because they save stores money, savings which are then passed down to consumers in the form of better discounts, or lower price increases. Future innovations such as driverless cars will make driving safer and reduce the number of taxicab drivers, and better medical treatments will reduce the demand for conventional doctors and nurses. The loss of those jobs is a small price to pay for the benefits of such innovations.