Unemployment Rates, an International Apples to Apples Comparison
by Mike Kimel
Unemployment Rates, an International Apples to Apples Comparison
Cross posted at the the Presimetrics blog.
One of the things we all know about America is that labor laws are more flexible here than in other developed countries, so we have lower unemployment rates than in other countries with relatively more rigid labor laws. Its one of those facts we are told over and over again, like cutting taxes spurs economic growth or that the folks benefiting the most from our largess in Iraq and Afghanistan, not to say an assortment of tin pot dictators throughout Central Asia, are pro-democracy and pro-America.
A lesser known fact is that unemployment rates are computed differently from country to country. (So is GDP, but that’s a topic for another post.) The Bureau of Labor Statistics, the folks who compute the unemployment rates here in the land of the (relatively) free market went through the effort of adjusting the unemployment rates of the US and nine other countries (Canada, Australia, Japan, France, Germany, Italy, Netherlands, Sweden, and the UK) between to allow for an apples to apples comparison. I think the most interesting data – the comparison of overall unemployment rates from 1970 to 2009 – is in table 1-2, which I’ve imported into Excel and graphed below.
The chart is a bit busy, but hopefully you could tell what’s going on if you look closely. And what I see is this…
For most of the sample, one or two countries produced, hands down, the best outcomes in the sample. For the entire sample, Japan is always one of those countries, but the other front-runner changes mid-sample. Sweden (yes, “socialist” Sweden) was the other in the period from 1970 to 1990, and the Netherlands (yes, “socialist” Holland) becomes the usual leader of the pack starting in the late 90s. Japan, of course, like Sweden and the Netherlands, is not exactly well-known for its flexible labor laws.
I don’t know enough to say what happened in Holland and/or Sweden but I have a hard time concluding that in their respective heydays they were a libertarian paradise.
As to the US… frankly, it did pretty lousy relative to the others from 1970 to about 1982, whereupon it began improving, eventually getting the point of contending for the top spot in the peloton. The US had a brief shining moment in the Sun – producing the second or third best performance from 1993 to 2000… but its been downhill from there. Put another way… things started going downhill, relatively, for US unemployment when the country began benefiting (ahem) from the most free market administration in the sample.
What I don’t see in the graph is any sign that the US approach to the labor markets can be described as the best, or even in the top three or four in this sample, assuming the goal is to keep unemployment down.
JzB, I grew up in the rust belt and know from experience that some folks are motivated to stay or volunteer for layoffs. in around 1967 the UAW added a new feature to its contracts that guaranteed a percentage of salary to laid off employees. By the time the auto company bail outs were needed, laid off employees were paid ~80-90% of salary. I was told (third party info) that at that time ~10% of the work force were laid off, and high percentage were voluntary. My uncle and brother’s FIL were included.
Education is an industry that concurs with that overall mind set. Some employees get part time work, and some just ride out the extended vacation. Most school systems provide 12 months of pay checks for 10 months of work to alleviate the load on the unemployment system.
If you think hard, you can find many real world examples of industries or locales that support that part time work/unemployment mind set. There are many, many seasonal industries. I’ll start the list with: recreation, agriculture, various segments of construction (especially in the colder climes), the auto industry pre-1967, home heating fuel delivery, etc. I’m sure we could add to this list.
The point is, there is much evidence that the part time work and unemployment benefits cycle is not only accepted, but the norm. In those areas it is certainly less of a social stigma and there is probably a higher correlation of supperior unemployment benefits. So in those areas it is logical to think that longer unemployment would result.
It seems to think otherwise, one must pretzelise (a new term) your thinking/logic.
Keep BBQing sacred cows cactus.
Re “assuming the goal is to keep unemployment down” you must be talking about the 1960s. After that, keeping unemployment down was occasionally “a” goal.
The striking thing about the graph is that prior to their lost decades, Japan had the lowest unemployment, and during the lost decades, Japan had the lowest unemploment, until socialist Netherlands snuck underneath them.
Even now, Japan is at what is considered full employment here.
And please don’t call the Netherlands “Holland.” That’s like calling the U.S. “Dixie” or “New England” or “The Rustbelt.”
A quick look at the bls tables indicates that Japanese unemployment is lowest among men, a bit higher among women, but rather high among 16 to 24-yr-olds, bouncing between 7.0 and 9.6% over the last decade. Youth unemployment here is very high.
You do great showing the raw data. But then your analysis of it falls into the Left-Right crap as usual.
First, What happened to socialist Sweden in 1990 that cuased it to fall out of grace? Finally run out of other people’s money?
Second, why are Sweden, Netherlands, Canada and Italy even in the comparison? California has a bigger GDP than these countries….where’s China? India? South Korea? Russia? Brazil? heck if we want little countries were is Spain? Turkey? Belgium? Denmark? Pakistan? South Africa? Luxemburg? Anything from the ex-gulag of eastern Europe (bet that 0% unemployment under Communism makes them look good).
Heck, where’s Greece?
Other than Japan, which has a culteral full-employment mode, the US looks real good reguardless of administration when compared against other big industrial countries you listed (UK, Japan, Germany, France).
The great run from the Carter induced 1979-82 recession/mass inflation to the 1990-92 mini-recession was on the same slope as the one you spot about under Clinton. Except Reagen didn’t have the Peace dividend and the entry of the US into the information age backing him. And then Clinton got us into the first dot-com bubble, followed by Bush II restoring the trend line only to have the next bubble blow up on him. Clinton got lucky and ran out the clock on his bubble and got out of office before the ‘pop’. Like I said back in 2007 (right here on AB), I was sure Bush II was going to run the clock out on the wars (Dem Congress had no balls) but was skeptical about his ability to repeat Clinton’s performance before the economy exploded. Since Presidents don’t have that kind of control over the economy, Bush just got unlucky.
About the best I get from this is don’t let Greenspan near the economy…
But we now have Dem President Obama and a totally controlled Dem Congress so I should be seeing 5% unemployment and 3%/year GDP growth. Or at least as good as Bush II did! Oh wait….
Islam will change
That’s because old people don’t want to retire there because they think the government is going broke and they won’t get their SS checks.
I think 1990 was when sweden had a banking collapse and nationalized the banks. Don’t know much about the details tho.
JzB, I answered your question re: generous benefits leading to unemployment (extended/permanent/voluntary, etc) with actual examples. My answer, absolutely, yes.
I started my examples of the auto industry and in particular the MI, then added references to educators, recreation, agriculture, various segments of construction (especially in the colder climes), home heating fuel delivery, etc.
My educator example was to show just how institutionalized was the practice with wage structure changes. The auto indistry is another example where wage and unemployment benefits are tailored.
My point in folding in the other examples wwas to show there are industries and locales where the practice is the norm. A feast to famine job environment, where it is common to work and take unemployment as a standard practice. Recreation/service jobs in seasonal recreation areas. If it is the expected norm, then it is unlikely that extended unemployment would not also be the norm during bad economic periods.
About Netherland 900 000 people seen as asocial or “disabled” are not counted.
For a country of 16 Million.
Mike Kimmel – “The US had a brief shining moment in the Sun – producing the second or third best performance from 1993 to 2000… but its been downhill from there. Put another way… things started going downhill, relatively, for US unemployment when the country began benefiting (ahem) from the most free market administration in the sample.”
Why don’t you discuss the comparison of unemployment rates for adults, ages 25 and older, as provided in Table 1-8 (BLS; your source) for the years 2001-2008? The United States of America had significantly lower unemployment as a percentage of the age 25 and older workforce during each year, 2001-2008, than the industrialized nations, France, Germany, and Italy. The USA had significantly lower unemployment than Canada with the exception of 2008. The USA had lower unemployment than Sweden for six of the eight years concerned.
This consideration is lost in your presentation.
“Most school systems provide 12 months of pay checks for 10 months of work to alleviate the load on the unemployment system.” CoRev
That’s one truly stupid comment. Such a comment demonstrates the depths of ignorancve that some bring to this conversation. Teachers who work a ten month school year do not qualify for unemployment because their salaries no matter how they are divided and paid are based on an annual amount, usually by contractual agreement. One has to be available for employment while unemployed in order to qualify for unemployment benefits. Not all teachers have summer work available in their school systems. Such work qualifies the teacher for additional pay, but is not readily available to all employees due to less need for servicces over the summer months. Twelve months of pay checks is a convenience to the teachers and a slight savings to the school system.
It looks like from ’82 to ’88 the U.S. went from consistent bottom half/bottom three to consistent top half/top three. (Yes, with lots of confusion in the past few years.)
Now I’m no fan of Reaganomics. QTC. But I’m always looking for the best counterarguments against my position, trying to figure out if they make sense and whether I should adjust that position.
My first sentence here — and the data you provide supporting it — qualifies on that count. I think the narrative you provide inaccurately and inappropriately pooh-poohs that view of the evidence.
In game theory, some outcomes may look very different depending on whether a game is played once or a large number of times. In life, the same is true.
A bit of unemployment benefits may lead even non-slackers to extend their unemployment stint by a bit because they’re extending the length of their search. However, that added time searching for a job may bring something closer to the “right” job. That is, it might put the person who was looking for a job in a better and more appropriate job, which would keep him/her in his/her job longer in the future, and as a better fit, would be better for the economy than simply making them take the first job that comes their way.
A good pitmaster knows that whatever the origins of the bbq craft, these days you need a good cut of meat to keep ’em coming back for more. There’s nothing wrong with many sacred cows. But the data seems to show that many of them contain a lot of mythical qualities, and those make the best bbq.
I used all data for all the countries they provided. I believe all of the countries on the list are OECD countries.
Could be. On the other hand, over here we have some incredible nincompoops in the workforce. I have an acquaintance who has impeccable (and impressive) credentials and on paper (and in his mind) has great skills. He is also the least competent person I have ever come across in my life. Homer Simpson has nothing on him. It speaks poorly of the American system that he has managed to get this far without being weeded out by the corporate structure, and it cannot be good for the economy that such incompetence continues to infest the workforce.
Simply put, I’ve been swamped and these graphs take a while to make. I chose to look at overall unemployment.
If you have something you want to add, feel free.
I’m pretty sure I’ve stated once or twice, though it was never a point I stressed – I tend not to analyze other people’s time series forecasts in large part because even the best, most honest forecasts require assumptions of conditions that may not pan out. (I know, that’s a big part of what I do for a living.) If I were to do an analysis, I’d probably end up spending way too much arguing against one or another assumption (because of what I do for a living, I try to get the best assumptions possible), and frankly, unless the assumptions are AEI- or Heritage-quality, all that amounts to just a quibble.
I prefer to try to get my own lessons from the data. We all have a shtick; this is mine. That isn’t to say it isn’t worthy of an AB discussion, merely that given the bandwidth I have available and my interests, its probably not something I’m going to do without a paycheck being involved.
States establish laws pertaining to unemployment benefits.
In some states teachers are eligible to receive unemployment benefits during school breaks, other states have strict eligibility requirements and still others do not allow teachers to collect benefits.
The interested party might wish to contact their teacher’s union representative or the divison of state government that handles such matters in their state of residency.
Great, so you have a cherry picked set. If your comparing apples to apples you need to drop the countries with GDP’s less than Microsofts gross. Comparing Sweden with the US and saying – look what socialism can do for you – is just as equally insane as the nuts saying, “hey, look at Greece, that’s where the US is going.”
To take this to an absurd level, would you have left Luxemberg, Latvia, Andorra, Monte Carlo, and the Vatican City on there to compare if that was what was provided?
Your graph shows that the US does very well, reguardless of administration.
Islam will change
I believe its called the Peter Prinicple…
I have found some totally incompetants durng my days also. All but one had one or the other traits going for them. 1) Were in a government job were it was more of a pain to get rid of them than to just ignore them or transfer them to some other poor slob or 2) Could at least pick excellent subordinates and then let them run the show and just ride the wave (but were literally to dense to understand the technical ideas presented to them.)The outlier was a sociopath who could suck up better than anyone I have ever seen – like the difference between a good High School runner and the Olympic 1 mile gold medal winner. It was truely a sight to behold.
And I’m pretty sure the US is not alone with this problem.
Islam will change
Also you missed the absolutely horrible performance during the Carter years, something Obama seems to be trying to recreate.
Islam will change
not true we had a school district in Michigan that laid it’s teachers off every summer
I dont think it’s fair that good hard working people with a family can not find a job anywhere. It makes it hard for these type of people to take care of their family. I personaly have been looking for a job for 2 years and still have not been able to find one because I do not have a college education. I cannot afford college. yes I can get financial aid but I still have to pay over 50 dollars a month out of pocket to the school. I think something needs to be done to help people like us.Employment rates in California