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WHO MEASURES THE MEASURERS – AND THEIR ENABLERS?

September 10, 2014

WHO MEASURES THE MEASURERS – AND THEIR ENABLERS?

My now-deceased wife liked to tell the story of how her statistics professor in his very first lecture to her class of doctoral students doing their course work about a fundamental truism in statistics – how biasing the sample skews the result – and it goes like this: Her professor said that “Statistics show that one out of every four billion airline passengers who board an airplane carries a bomb, so I always carry one when flying to reduce the risk.” Stories such as this, of course, reinforce the common saying that “you can prove anything with statistics.”

There are other ways to bias samples for statistical purposes, some of them political. Politicians always want to look good, and one way to look good is to bias the sample so that the skewed result will look better and, presumably, get more votes for the biasing politician. Thus Republicans when seeking cover from claims that they are impoverishing middle America break out income “statistics” based on averages, knowing full well that when “averages” include incomes from Bill Gates, Warren Buffett, CEOs, hedge fund managers and others of the superrich that middle America will be shown to be relatively prosperous. Thus such a statistical method is selected because the true method (family median wage) shows that America’s wage standard has been stagnant or declining for decades, a truth Republicans do not want to admit – hence their choice of measurement.

Reagan’s  long-ago change of what goes into “the basket” in order to determine the rate of inflation is illustrative, and the result of such political interference in measuring inflation is still with us today, since our rate of inflation is clearly higher today than that published by governmental entities such as the Fed. Reagan’s omissions were not only of a political design; they were also designed to reduce the “official rate” in order not to pay out more in Social Security and other such costs dependent upon the “official rate” of inflation. It was in keeping with the Republican tradition of keeping the poor poor, but in this case it was even worse, since Social Security payouts which are not based on the “real inflation rate” in truth amount to a cut in benefits, thus making the poor even poorer by falsely stating real cost of living.

The foregoing is prelude. This essay is designed to look into measurements of employment and unemployment and non-statistical factors bearing on the samples taken, measures the Fed watches carefully in order to determine whether to adopt policies to speed up or slow down economic growth which, among other factors, requires keeping an eye on “official” inflation numbers, which is, in turn, worrisome if the inflation numbers relied upon are understated. The old saw that “Numbers don’t lie” is true in isolated context, but the motives of those choosing the numbers can dictate a contrary result which can penetrate the inner sanctum of policy-making in government, and I fear that is happening as a matter of routine today. Our measurement of our measurements needs attention.

Last Friday we were told that the U.S. unemployment rate for August was 6.1%. That sounds much better than the 18 euro-using countries of Europe, which had a collective rate of 11.5%. Or is it? By some measures, Europe is doing better than we are. How can that be, one may reasonably ask, when Europe has an unemployment rate over 5% greater than ours? Let’s look at the inner measures.

Europeans in their prime working years (25 to 54) are more likely to be employed than Americans are, whatever the “unemployment rate.” Less that 77% of such prime-age Americans have jobs, while 80% have jobs in Belgium, 81% in France and 82% in the Netherlands (per the Organization for Economic Cooperation and Development, the OECD). Germany is in even better shape; if Americans aged 25-54 were as likely to be working as Germans of the same age range are, 8.3 million more Americans would have jobs! What are the Germans doing, or not doing, that could account for such a huge discrepancy? Just imagine what our unemployment percentage would be if 8.3 million more Americans had jobs! Just imagine how labor shortages would bring about an end to wage inequality, end our current account deficit and reduce our long term debt! With zooming aggregate demand for goods and services in our economy, just imagine how the recycling of such new wealth throughout the economy would boost ancillary employment. Finally, just imagine how these millions of newly-hired Americans would come off food stamps and other social safety net costs to government on the other side of this happy equation.

Let’s look at how we measure unemployment before crowing about our falling rate. The Economic Policy Institute says America’s relatively low “headline unemployment rate is painting too rosy a picture of how the U.S. labor market is doing.” Why? It’s because our government does not count adults neither working nor looking for work; the government counts people as unemployed only if they’re looking for a job. Thus, for instance, when many stop looking for a job, the unemployment rate can fall even if few or even none are newly hired. That tactic, to me, means that the government is treating those who are not looking for a job in a third unnamed category, i.e., neither hired nor unhired, an eventual workforce temporarily ensconced in an employment purgatory awaiting news that decent jobs are available.

Economists are at a loss to explain why prime-age employment and workforce participation trends are weaker in the United States than in Europe, but some speculate that (non-statistical) labor laws are involved. Thus (and especially with the destruction of America’s labor unions orchestrated by the corporate culture, Wall Street and their Republican lackeys in state and federal legislatures) Europe does a better job of protecting its prime-age workers. Per Dean Baker of the Center for Economic and Policy Research, “There’s nowhere in Europe where you can just fire a worker,” but by contrast, “It’s very easy for companies to fire workers in the U.S.” Full-time job contracts in France, for example, make it difficult and expensive for employers to shed staff. To be fair in my analysis, there is a downside to this, i.e., would be employers are less likely to hire workers if they know they can never get rid of them.

Another suspect of economists in trying to explain the disparity between the U.S. and European unemployment numbers is the disability rate in America. The number of of Americans receiving disability payments from Social Security has gone from 7.1 million at the beginning of the Great Recession to 8.9 million today. Our system defines disability as a static or permanent condition whereas in Sweden, for example, workers can take sick leave and then transfer if necessary to temporary disability. Yet another suspect is the percentage of women 45 or over in the U.S. and Europe who are working or looking for work. Europe is doing better and economists suspect that the reason is that American women of that age are caring for aging parents, while government programs in Europe pay for such services as supported by Europe’s higher tax rate – a support of people we have abandoned in favor of spending on the superrich while leaving aging parents and their children to fend for themselves.

So who measures the measurers of selective statistics and their enabling policy makers who make laws and adopt policies to fit the demands of the latters’ campaign contributors? It is our task.  GERALD   E

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