Uninformed: “The other 90% are Employed”

The “U” in the Unemployment rate, might as well stand for the word “Uninformed” for many talking heads, journalists and economists. In fact, 33% of the working age population (16 to 65) are not employed as of Oct. 2011.  (66 million working age persons not employed.)

What Does Concealed Unemployment Mean?

When people who are out of work are not counted in official unemployment statistics for a variety of reasons. Those potential workers falling into this category typically include individuals who have given up looking for employment, those who have taken an early retirement even though they would prefer to still be employed and those with seasonal or part time employment. (source: investopedia.com) 

This paper will be looking at a Bureau of Labor Statistics definition known as “Not In the Labor Force” (NILF). The NILF can conceal problems in Unemployment indicators and labor supply/demand problems caused by increased Population.

Definitions for this document:

Labor Force: The number of persons Employed plus the Unemployed

Unemployed: The number of persons in the age group who are defined in the U-3 “Headline” unemployment rate

Not In the Labor Force: Persons neither employed nor unemployed

Population: The Non-Institutionalized Civilian Population, those counted in the “Labor Force” plus those counted as “Not In the Labor Force”

BLS CPS: Bureau of Labor Statistics, Current Population Survey

End Definitions:

Chart 1 (Click on charts to enlarge)

Displayed in Chart 1, is the entire BLS data record for noted classifications for Ages 16 to 65. Chart 1, is provided to display the historical trends in the various classifications in the working age population.

Chart 1 shows the Population, Labor Force and Unemployed follow traditional trends with an understandable departure following the mortgage meltdown. The NILF however, departed from the long-term trend in 1999.

Chart 2

Chart 2 isolates the long-term trends in the NILF and Unemployment percentage rates, reinforcing the observation made from Chart 1.

Chart 3

Chart 3, focuses on 1999 going forward – starting with a fresh count at the end of year 1998. Thus, Chart 3 displays the “change” since end of year 1998.

There is a lot to absorb in Chart 3. Concerning the NILF, the additions to the NILF have exceeded the additions to the Labor Force (Employed plus Unemployed). The NILF accounts for 52.6% of the 26,229,000 added to the working population. Finally, 57.7% of the additions to the Labor Force were in the Unemployed subcategory.

Chart 4

Chart 4 is provided to display that there is a connection to the NILF and the prior few years’ Unemployment levels. The levels of the NILF category traditionally have fluctuated between 35 million and 40 million before a substantial increase of levels began in the late 1990s. Since the end of 1997, NILF levels have increased by 34.8%.

Also noted in Chart 4 is a change in the average Unemployment levels, From 1948 to 1971 the average Unemployment rate was 4.5%, from 1972 forward the average Unemployment rate has been 6.2%. Since 1981 average unemployment rates have increased by 37.2%.

Note: The significance of 1971 is that President Nixon abandoned the Bretton Woods accord and closed the “Gold Window”. The “Gold Window” was an assurance that Federal debt instruments and Reserve Notes could be redeemed in gold. Closing the “Gold Window” caused the oil embargo and gasoline shortages of the early 1970s. Additionally, two severe depressions in Mexico followed President Nixon's 1971 actions.

Chart 5

Chart 5, shows year over year increase/decrease in levels added to NILF, Unemployed and Population. Chart 5 tends to indicate that lower levels of increase in Population level coincide with lower levels of increase in unemployment rates and lower levels in increase in the NILF category tend to follow.


There is always reserve human capital in the NILF and there are many reasons why people leave the labor force, one reason that is rarely discussed is that many self employed persons refuse to work below the cost of doing business.

Chart 6

Chart 6 deals with U.S. born population increases, population increases from immigration and employment level growth in the 16 to 65 age group. The U.S. born population data is births minus deaths in the birth year, with 16 years added to the birth year to adjust the year these children entered the working age Population.

Note: The Population increases from U.S. births and the Employment level increases are directly relational, the portion of Population increase from immigration may contain persons over the age of 65. For completeness, Employment levels have increased by just over 3 million for persons 65 and older since end of year 1998.

In conclusion, it is clear from Chart 6, that employment growth levels no longer support the United States traditional immigration levels. Charts 1 through 5 demonstrate that concealed unemployment causes the headline Unemployment Rate to be far below the actual rate of unemployment.

Data Sources:


=======================================================
Data Sources: US Department of Labor, Bureau of Labor Statistics
Downloaded 10/09/2011
(Ages "65 years and over" are subtracted from "16 years and over" to determine the various levels in ages 16 to 65)
=======================================================

Series Id: LNU00000000
Not Seasonally Adjusted
Series title: (Unadj) Population Level
Labor force status: Civilian noninstitutional population
Type of data: Number in thousands
Age: 16 years and over

Series Id: LNU00000097
Not Seasonally Adjusted
Series title: (Unadj) Population Level - 65 yrs. & over
Labor force status: Civilian noninstitutional population
Type of data: Number in thousands
Age: 65 years and over

=======================================================

Series Id: LNU01000000
Not Seasonally Adjusted
Series title: (Unadj) Civilian Labor Force Level
Labor force status: Civilian labor force
Type of data: Number in thousands
Age: 16 years and over

Series Id: LNU01000097
Not Seasonally Adjusted
Series title: (Unadj) Civilian Labor Force Level - 65 yrs. & over
Labor force status: Civilian labor force
Type of data: Number in thousands
Age: 65 years and over

=======================================================

Series Id: LNU03000000
Not Seasonally Adjusted
Series title: (Unadj) Unemployment Level
Labor force status: Unemployed
Type of data: Number in thousands
Age: 16 years and over

Series Id: LNU03000097
Not Seasonally Adjusted
Series title: (Unadj) Unemployment Level - 65 yrs. & over
Labor force status: Unemployed
Type of data: Number in thousands
Age: 65 years and over

=======================================================

Series Id: LNU05000000
Not Seasonally Adjusted
Series title: (Unadj) Not in Labor Force
Labor force status: Not in labor force
Type of data: Number in thousands
Age: 16 years and over



Series Id: LNU05000097
Not Seasonally Adjusted
Series title: (Unadj) Not in Labor Force, 65 yrs. & over
Labor force status: Not in labor force
Type of data: Number in thousands
Age: 65 years and over

=======================================================
U.S. Born Population Birth/Death Data
=======================================================
Source: U.S. National Center for Health Statistics,Vital Statistics of the United States, and National Vital Statistics Reports (NVSR).

For more information:
http://www.cdc.gov/nchs/nvss.htm

Internet release date: 09/30/2011
http://www.census.gov/compendia/statab/2012/tables/12s0078.xls

Train your replacment

Wall Street Journal Blogs
Infosys Employee Testifies on Alleged Visa Fraud
By Megha Bahree and Miriam Jordan
July 28, 2011, 10:48 AM IST

In a statement to the Senate Judiciary Subcommittee on Immigration, Refugees and Border Security on Tuesday, Jay Palmer, the whistleblower at Infosys, said the company “intentionally violated our visa and tax laws for the purpose of increasing revenues.” Mr. Palmer accused Infosys of frequently violating U.S. visa laws and of staffing multiple client projects with illegal employees, including at Goldman Sachs, American Express, Wal-Mart and Johnson Control, among others.

Mr. Palmer filed a lawsuit against the company in February in Circuit Court in Alabama, alleging the company sought his help to circumvent U.S. law. The lawsuit has led to a probe by U.S. authorities.

Business Line
Infy visa case: Petitioner wants to prove he is right

Balaji Narasimhan
Bangalore, Nov. 12

In July, he [Palmer] said, “Infosys also decided to flood the consulate with applications in order to get as many approved as possible no matter the level of an individual's skill. This was totally about profit and not hiring Americans for jobs in the US due to higher salary requirements."

Updates Palmer vs Infosys:
Infosys’ H-1B visa misuse: US court denies arbitration in Palmer case

FP Staff Nov 10, 2011

In a major setback to IT bellwether Infosys, a US court has denied arbitration in the visa case filed by employee Jack Palmer against the software major.

Visa misuse: Infosys in trouble, again
Sep 7, 2011 0 Comments

After two earlier complaints of visa misuse, a third whistleblower complaint has been filed against the software giant for non-compliance of form I-9.

Palmer’s lawsuit against Infosys gets teeth as allegations snowball
Sep 9, 2011 14 Comments

All three whistle-blowers, including Palmer have said Infosys misused short-term B1 visitors’ visas to bring in low-cost engineers from India. If Infosys was hoping to settle with Palmer out of court the odds aren’t looking too good for Infosys.

ConputerWorld
Fired IT workers file lawsuit claiming H-1B workers replaced them

Workers file suit against Molina Healthcare and its outsourcer, Cognizant
By Patrick Thibodeau
July 12, 2011 03:53 PM ET

Eighteen IT workers in California have filed a lawsuit against their former employer claiming they were replaced by H-1B workers from India and then laid off in violation of the state's anti-discrimination laws.


In the lawsuit, the 18 workers say that IT managers at Molina Healthcare Inc. increasingly catered to the Indian workers while leaving U.S. workers, mostly security analysts and programmers who earned at least $75,000 a year, feeling excluded prior getting laid off last year.

SFGate
BofA: Train your replacement, or no severance pay for you
June 09, 2006
David Lazarus

"If people want their severance packages, they have to train their replacements," a senior engineer at one of BofA's Bay Area facilities told me. "There's nothing in writing that says this -- the bank's been careful about that. But it's made clear at meetings what we're supposed to do."
 

Shirley Norton, a BofA spokeswoman, confirmed that while workers aren't being explicitly told they have to train their replacements or risk losing severance pay, they are being instructed that severance pay is contingent on satisfactorily completing their jobs.


Completing their jobs, in turn, can include training replacements from India, she said.

San Francisco Business Times
Bank job: You're fired, now go train your replacement
Date: Sunday, November 24, 2002, 9:00pm PST

Sure enough, dozens of Indian tech workers have been visiting BofA's major tech centers in Concord, Jacksonville, Fla., and other cities around the country recently. They're getting training on work they'll do back at home for about half what departing employees are paid. The bank confirms that some laid-off workers are being required to help train new ones (and not speak to the media) as a condition of receiving severance.


The fact that BofA is simultaneously cutting jobs here, outsourcing similar work and requiring old job-holders to train new ones shouldn't lead anyone to assume these moves are in any way related, a spokeswoman insisted.

"Our sourcing strategy and these job cuts in response to economic conditions are completely separate," said BofA spokeswoman Juliet Don in San Francisco.

BusinessWeek
IBMers Training their Replacements?
Posted by: Steve Hamm on March 10

Why not just take the pink slip and tell your boss to shove it? How widespread is this practice of forcing people to train their replacements? How does it work? Do other companies do similar things?

Pleasanton Weekly
Tri-Valley University brought students and spouses into U.S.
Times of India cites ministry report
by Glenn Wohltmann

Tri-Valley University not only brought students over to Pleasanton on illegal visas, but many of those students brought their spouses here as well, according to The Times of India.

The paper cites an Indian ministry report that says a number of immigrants got their spouses admitted at Tri-Valley, which helped them get an extended stay of up to eight years with illegal student work permits, or brought them into the United States through dependent H-4 visas, the report says.

Once in, some secured admission in accredited universities and got F-1 student visas. Later, many shifted to Tri-Valley, according to the report cited by The Times, which said the university gave them the opportunity to work from day one, although Tri-Valley was not authorized to do so.

Department of Justice
THURSDAY, MAY 1, 2008
iGate Mastech Inc. to Pay $45,000 in Civil Penalties to Settle Discrimination Claim

WASHINGTON - The Department of Justice today announced that iGate Mastech Inc. (iGate), a Pittsburgh computer consulting company, has agreed to pay $45,000 in civil penalties to settle allegations that iGate discriminated against United States citizens in its employment practices. The settlement also requires iGate to train its recruitment personnel and to post a nondiscrimination statement on its Web site.

The settlement stems from the Department’s finding that, between May 9, 2006, and June 4, 2006, iGate placed 30 job announcements for computer programmers that expressly favored H-1B visa holders to the exclusion of U.S. citizens, lawful permanent residents, and other legal U.S. workers. Such preference constituted citizenship status discrimination and is prohibited by the Immigration and Nationality Act.