I very seldom post a 3rd party’s contribution to this blog, but Benl8, who often comments on this blog, and is an excellent researcher and quantitative analyst, has offered an explanation that I hope Henwood bothers to read. Ben has dug up what is the most likely explanation for the millions of workers who have dropped out of the labor force and don’t show up in official BLS stats.
Ben’s commentary provides an explanation for why the labor force participation rate has fallen nearly 5% since 2000–and thus in turn an explanation why the unemployment rate (U-3 or U-6) are inaccurate BLS estimates of employment and unemployment.
Ben has accessed the social security data base to find an alternative explanation. This is the same database that UC Berkeley prof, Emmanual Saez, used back in 2002 to expose official Commerce Dept. obfuscation of income concentration in the US. Before Saez used the social security database, US official stats refused to describe income distribution except in obfuscating 20th percentiles divisions. Saez exposed this, showing the income concentration among the wealthiest 1% households that now is commonly accepted. Saez performed yeoman service for all in his work. Benl8 may be on the same track when it comes to the labor force participation rate and other BLS estimates for discouraged, missing labor force, and other categories which I believe are grossly underestimated (which results in artificially low estimates for unemployment).
Ben offered his explanation as a comment to my blog posts. Many readers may not get to read it there. So I’m re-posting it here. Do read it. It’s the kind of research we all should be doing, instead of just blindly accepting or apologizing for government stats and interpretations, which Henwood always insists on doing. Here’s Ben’s comment: (and you read it too, Henwood, I know you read this blog).
benl8
I have thought about this. I regularly go to njfac.org, and take their figures. But then I also do this: The Social Security Administration publishes a wage income report. The latest is for 2017 and the next comes out in mid October. Here’s 2017: https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2017 — It shows 165,438,239 workers in 2017. While the BLS shows a labor force of 160,320,000 with average employment of 153,337,000 working. (I took that from https://www.bls.gov/web/empsit/cpseea01.htm) Now let’s agree that the SSA is correct, 165mn worked, and usually 153mn were at work, it indicates that 12 million were not working on average, that’s a U3 of 7.3%. Now I will go to National Jobs for All Coalition and add on the involuntary part-timers, 4.4 million in August, 2019 (and it was higher in 2017, but I don’t want to look it up). Therefore the U6 will be around 12mn plus 4.4 mn, or 16.4 mn, or about 10%. I agree that the BLS is much understated, and my method incorporates the SSA data, and is not dependent on phone surveys. Also, it must be stated, the SSA data shows that the collective income of the lower-earning half, or 82 million workers, is just over $1.1 trillion. The national income, which I take from the Joint Committee on Taxation (Overview, 2017), was about $14.4 trillion. So, the lower half earned in wages less than 8% of all income. Who received the other 92%? This is pre-tax income. The “State of Working America” has a table on the sources and distribution of income, Table 2.4, Income. It showed that the lower-earning 80% took in wages about 28% of all income. It was difficult to figure that out, but my memory serves me pretty well. See here: http://www.stateofworkingamerica.org/index.html%3Fp=29591.html —
You can check, the lower 80% earned 50.2% of all wages, and wages were 54.3% of all income, therefore their wage income was 27.3% of all income. And this is post-transfer assessment, so the social security is taken out and transferred. Complicated. The end take away: low income workers make very little relative to total income, and the unemployment numbers don’t accurately show the huge number who are marginally employed, yet still submitting W-2 forms to SSA. My first blog (http://benL8.blogspot.com) has a graph showing that income for the lower-earning 90% held steady around 55% from 1940 to 1980, and since then has dropped to 38%, a drop of 17%, which comes out to about $23,000 per household in the lower-earning 90% of households. My current blog: http://benL88.blogspot.com, and the first one: http://benL8.blogspot.com where the graph is easily located. It comes from data by Saez and Piketty. Hope this helps. It’s a messy comment/answer. Is it really important that the BLS U3 is wrong? Definitely. And is it important to know how little the lower-earning half or 80% or 90% are earning. Yes, it’s a huge inequality that is disabling the economy and people’s lives.
Dr. Jack Rasmus @drjackrasmus
Jack Rasmus 
[…] [Related: A) Here We Go Again…Debating Henwood on Official US Govt. Job Stats; and B) Benl8 Weighs In: Refuting Henwood on Labor Force Participation and the Missing Millions of Workers] […]