By: Jessica Vattiprolu and Kate Cortes
Discouraged and frustrated, millions of Americans are spending months and sometimes even years without a job. The bills do not stop and neither do any of their responsibilities, but yet despite their best efforts, it is still difficult for them to find work. Some commuting hours away just to take whatever job they can get, no matter the inconvenience.
Mr. Bhanuchander Ledalla, an IT professional who has been unemployed for 7 months shared his story and what he believes to be the main cause for unemployment, “Skillset. I work in the IT industry and I specialize in one skillset. But nowadays, everyone is asking for multiple skill sets for the same job because they want to hire one person to do multiple jobs, which I believe is the main cause for unemployment.” Mr. Ledalla applied to over 500 positions in the 7 months that he was unemployed, actively looking for work. Eventually, he got a job in Wisconsin and worked remotely most days, while commuting over 2 hours to work once or twice a week when he travelled from Chicago. Why are intelligent, highly-qualified workers struggling so much and for so long to find a job?
According to the U.S. Bureau of Labor Statistics, the unemployment rate for Illinois has dropped to 4%. This has been the lowest unemployment there has been in the past few years. The U.S Bureau of Labor Statistics mentioned the rate went down even further this year by 0.2% since July. The decline of unemployment rates over the past few years is shown in the graphic below.
Unemployment is not just measured by one group; there are actually many components that contribute to unemployment. The U.S Bureau of Labor Statistics measures unemployment by people who want to work. By that meaning, people need to be actually searching for jobs submitting resumes and calling workplaces for opportunities.
Mr. Ledalla went on to discuss what he thinks needs to be done in this country to improve unemployment rates long-term, “America mostly hires through outsourcing to other countries for labor but if this can be taught in the school level, if students can learn coding from childhood, they will be more skilled and can be employed easier.”
What Unemployment Means
UIC Economics professor Paul Pieper said, “Unemployed doesn’t just mean you are without a job, you have to be without a job and actively searching for a job.”
He explains the misconception about being unemployed. One needs to be searching, if that is not the case, then one would be considered to be part of the “discouraged worker” group.
“A discouraged worker would be somebody who wants to work but they’re not actively looking for a job,” Pieper said. “If you’re not actively looking you’re not gonna show up in the unemployment figures.” For example, stay-at-home parents and college graduates that are taking time off school and not actively looking for a job are not included in the unemployment statistics.
Keep in mind, the U.S Bureau of Labor Statistics keeps track of who is wanting to work and has something to show for it. These people who are not taking any steps to obtain a job are being left out of the count. That has a direct effect on the general unemployment rate.
Why are Unemployment Rates Low Then?
Pieper said some of the possibilities as to why the Bureau received low unemployment data. One of them being that it could be that people are just not actively searching for jobs anymore. Hence, the “discouraged worker” concept comes into the picture.
He said, “The number of people actively looking for jobs went down so why that happened maybe some people gave up so, the lower unemployment rate doesn’t necessarily mean that things are getting better in the workforce.”
However, UIC professor, Ben Ost, gave his input on this subject. He said, “the bureau of labor static also releases unemployment rates that include discouraged workers and they just count them as unemployed and it’s not a huge group, and so I don’t think the general statistics about unemployment rate is gonna be terribly influenced by that.”
So while people may believe Chicago is at a good spot with jobs, however like Pieper said, it isn’t always a good thing. He mentioned that wages are one of the contributing factors to the unemployment rate.
What Are Some of the Main Problems?
“Generally, wage growth has been sort of disappointing during this recovery, so wages have been going up but just a little bit more than inflation,” he said. “So if they’re only going up by inflation, your standards of living really isn’t getting better, you’re just keeping up with the cost of living.”
According to Pieper, wages are barely keeping up with inflation, which is not a good thing either. This means that people’s wages are going up every year not completely for their benefit, but only to match just enough to match inflation. That should say something about the unemployment rate.
Pieper explains the dilemma, “In past historical experience with unemployment rate being as low as it is you would think laborers are in a really good bargaining position, that firms would be competing for workers, firms would be getting really big wage increases, that hasn’t happened.”
Another problem he mentioned that not many put a lot of thought into is automation in the workforce. In other words, machines are replacing people’s jobs. Those people have a direct impact on the unemployment rate.
“One of the leading causes is that its been increasingly easy to automate many sorts of tasks that workers do so it has been increasingly easy to replace workers with machines,” he said.
“In the short run they might affect unemployment because you lose your job and it takes you awhile to get a new job,” Pieper said. “You eventually settle on something that isn’t as high paying as you used to. The longer run’s real concern is the effects on the income inequality that comes about from that.”
In some of the poor neighborhoods of Chicago, there seems to be bigger groups of unemployment. Pieper explains that again, the “discouraged worker” has an effect on people.
“In the poor areas of the city I’m sure the unemployment [rates] are higher but the poverty rate is probably even worse because I think in some of the poor areas that’s really where you would get the “discouraged worker” effect, he said. “So you probably have a lot of people without jobs and they have probably given up looking for a job.”
Other factors that contribute to the economic health of a community is not only unemployment but also average income per capita, household crowding, adults in the area without a high school diploma, etc. There are many other aspects to analyze before coming to a conclusion about whether a particular city is economically healthy. Here we can see the drastic differences in income per capita by each community in Chicago, which illustrates that geographical location does impact job opportunities, income, and in turn unemployment rates.
What Can Improve It?
At the national level, Pieper explained that focusing on education would help unemployment rates long-term, rather than a short-term fix with increasing minimum wage. Education hugely impacts the jobs available for people and their wages when working in that job. To see this clearly, the infographic below shows the staggering numbers of how much level of education impacts employment. Another way to improve unemployment rates and better the economy is to make taxes fair for the upper and lower income classes.
He said, “Have a focus on education, that’s where the higher paying jobs are, there should be more investment in infrastructure, and third thing I think there should also be more focus on trying to lessen income inequality,” he said. “The last major tax bill is actually lowering taxes for the upper income class versus the lower income class.”
According to Pieper, making the lower paying jobs increase their pay would make a difference. As well as helping people’s living situations.
“Try to make those [low wage] jobs better paying jobs, more of the middle class jobs by lessening the tax burden on those people,” he said.
Jessica Vattiprolu Data Storytelling 