Teaching the Unemployment Rate, and Its Limitations
Bonnie Meszaros teaches the unemployment rate. Photo by Aaron Nathans.
With the new batch of jobs numbers about to come out, a group of high school teachers last week gained a lesson in how that rate is calculated, so that they can teach it to their students.
They gathered to participate in a Teach-the-Teachers Initiative session, put on by AIER and the Federal Reserve Bank of Philadelphia.
One of the most memorable moments of the three-day program in Philadelphia came when Bonnie Meszaros, associate director of the Center for Economic Education and Entrepreneurship at the University of Delaware, provided a lesson in calculating the unemployment rate. She is one of a group of experts in economic education who collaborates with AIER on this program.
Meszaros assigned each teacher in the room a card, representing an American adult and his or her work status. They read aloud what their role was, including some people whose status was easy to identify: A full-time worker, someone who had been laid off, someone who had been fired.
But then there was the 30-hour-a-week worker (employed, for the purpose of calculating the unemployment rate); the five-hour-a-week worker (employed); a prison inmate (not a member of the labor force); a retired worker, a stay-at-home Mom, and discouraged worker who had stopped looking after a year (all not counted in the labor force).
Eight were counted as employed, and four were counted as unemployed. The workforce had 12 people, so the unemployment rate, for the purpose of this exercise, was 33.3 percent.
But Meszaros said there are limits to the unemployment rate that we have come to know through the news, which is also known as “U-3” unemployment, as defined by the Bureau of Labor Statistics.
The U-6 unemployment rate, meanwhile, tends to be a better reflection of the health of the labor force, she said. This includes unemployed Americans, along with discouraged and part time workers.
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