Hidden unemployment: A Critical Review and Analysis across countries

A broader measure of unemployment by the United States’ Bureau of Labour Statistics (U6), expands the official unemployment measurement (U3) by considering a number of categories of persons who are not included in U3 either because they are not searching for job (discouraged workers) or because they are working, but under-employed (part-time workers for economic reasons). However, the U6 measure is available only for a relatively short period of time (from 1994), compared to U3 which is available from 1948. Starting from a general-to-specific approach, we explore the determinants of the U6 rate using the cointegrating relationship between U6 and its determinants. Due to limitation in the data availability required to project U6 backwards to the same date as the U3, we examine the cointegrating relationship between the US BLS U6 rate as left-hand-side variable and many possible explanatory variables in chapter III. We find that besides the traditional unemployment rate (U3), the confidence of consumers is significant in influencing unemployment in its extension in the United States. And the business cycle also plays an instrumental part in the analysis. We explored using the autoregressive redistributive lag framework including a vector error correction model of the variables the short- and long-run relationship among them. We also include an assessment of the stability of our model parameters and tests of structural breaks. Prior to chapter III, we do a critical review of the world’s hidden unemployment; i.e., the global labour underutilization. We introduce key concepts and definitions of the ILO as they relate to the study. We begin chapter IV with a cursory look at the global unemployment statistics in the world’s regions. Basing on the unemployment rate in its extension adopted in the ILO statistics, namely the Hauser labour underutilization indicator LU4, we find that time-related underemployment, worker discouragement, vulnerable employment and informality determine much of the world’s hidden unemployment. One problem in the estimation, however, lies in data unavailability for the fact that data for developing countries as well as two countries containing much of the world’s total population, namely China and India lack the crucial data on the marginally attached principally on discouraged jobseekers. In chapter V, we extend our study to exploring further the dynamics of the extended unemployment for European countries and OECD countries where much of the data is available. We find that business cycle influences significantly impact the total unemployment situation among European countries. And the patterns are heterogeneities, associated with the idiosyncrasies of the individual countries, and their labour programs and policies affecting them.