So How Bad Is Unemployment in Germany?

There are a couple of rightwing rants that are like fingernails across the chalkboard for me. One is the ongoing claim – even today – that the US labor market is just wonderful because our unemployment rate has stayed near 4.6% for some time. Never mind the fact that the employment to population ratio has dropped from 63.4% at the end of 2006 to 62.8% as of August 2007. The other is to claims things just suck in European nations such as Germany.

As he does so often – Dean Baker provides some wonderful insights on what many brain dead pundits get so very wrong:

The article also misleads readers on the extent of Germany’s unemployment rate. It reports that the rate has fallen to 9 percent, implying Germany still has very high unemployment. In fact, this is the official German measure of unemployment, which counts part-time workers as being unemployed. The OECD measure for German unemployment (which uses essentially the same methodology as the U.S.) is 6.4 percent. Since unemployment is still concentrated in the areas that were formerly East Germany, the unemployment rate in the areas that were formerly West Germany would be approximately the same as in the United States. There is no legitimate reason for using the official German unemployment rate, which is not comparable to the U.S. rate, without explaining the distinction to readers. This is especially inappropriate since the OECD rate is so readily available.

Dean provides this link to the OECD data on standardized unemployment rates (SUR) from which I took our graph as to how the unemployment rate for both Germany and the US rose during the first few years of this decade. In early 2001, SUR for Germany was 3% higher than it was for the US (that East German thing Dean mentioned). Over the next year, our SUR grew more than Germany’s but then their SUR did not peak until July 2004 while SUR for the US peaked in June 2003. The good news for both nations is that the unemployment rate has declined. For the US, the current unemployment rate is still higher than it was as of January 2001 but for Germany, the unemployment rate as of July 2007 was lower than it was as of January 2001.

But let’s see what Nicholas Kulish wrote in the NY Times that set Dean off:

Mrs. Merkel has also benefited from the resurgence of the German economy, which grew 2.9 percent last year. That is hardly scorching growth for China or India, but for a country that had not grown faster than 1.2 percent in any of the previous five years, it was terrific. Most important to national sentiment here is the ever improving job market. The unemployment rate has dropped to 9 percent, from 12 percent in 2005, the year Mrs. Merkel came to power. Most analysts attribute the jump at least in part to the controversial overhaul of the labor market led by her predecessor Gerhard Schroder … Some economists worry that the relatively modest labor market changes have fallen far short of what the German economy needs to assure its long-term competitiveness, and that the government might be well advised to use this time of prosperity to tackle the tough issues. Instead, the long-awaited recovery has led to relief and perhaps even a little complacency.

Our chart does not show that the German unemployment rate ever hit 12% and it indicates that it is far below 9%. What’s the deal? Dean explains:

The article also misleads readers on the extent of Germany’s unemployment rate. It reports that the rate has fallen to 9 percent, implying Germany still has very high unemployment. In fact, this is the official German measure of unemployment, which counts part-time workers as being unemployed.

To compare Germany’s official rate, which counts part-time workers as being unemployed, to the US official rate which does not (OECD’s SUR does not either) is an apples to oranges comparison. Our graph is an oranges to oranges comparison. Does Mr. Kulish understand what he writes about? Or maybe he’s have us do an apples to apples comparison leaving in part-time workers for both nations. Hmm – this source says there were 25.1 million part-time workers in the US. Wow – that’s 10.8% of the civilian adult population! Then again, the BLS defines part-time workers as “those who usually work less than 35 hours per week”. To be honest, I don’t know how the Germans define this. But maybe that’s why the OECD excludes part-workers from the unemployment statistics. One would think that reporters and rightwing pundits would know better before comparing official unemployment rates across nations.