Monday, February 6, 2012

The Unemployment Calculation: Abbott and Costello Style

When you study basic economics, you learn the many ways to count the unemployment rate...and then learn the the government calculates it very absurdly.  You see, if you are out of work, and stop looking for work because (1) there's none to be had or (2) you just quit, you don't get counted anymore!  Wow, our numbers just got better (because an unemployed dropped off the radar)!

Here's a "Who's on First" explanation:

COSTELLO: I want to talk about the unemployment rate in America.

ABBOTT: Good Subject. Terrible Times. It's 9%.

COSTELLO: That many people are out of work?

ABBOTT: No, that's 17%

COSTELLO: You just said 9%.

ABBOTT: 9% Unemployed.

COSTELLO: Right 9% out of work.

ABBOTT: No, that's 17%.

COSTELLO: Okay, so it's 17% unemployed.

ABBOTT: No, that's 9%...

COSTELLO: WAIT A MINUTE. Is it 9% or 17%?

ABBOTT: 9% are unemployed. 17% are out of work.

COSTELLO: If you are out of work you are unemployed?

ABBOTT: No, you can't count the "Out of Work" as the unemployed. You have to look for work to be unemployed.

COSTELLO: BUT THEY ARE OUT OF WORK!!!

ABBOTT: No, you miss my point.

COSTELLO: What point?

ABBOTT: Someone who doesn't look for work, can't be counted with those who look for work. It wouldn't be fair.

COSTELLO: To who?

ABBOTT: The unemployed.

COSTELLO: But they are ALL out of work.

ABBOTT: No, the unemployed are actively looking for work... Those who are out of work stopped looking. They gave up. And, if you give up, you are no longer in the ranks of the unemployed.

COSTELLO: So if you're off the unemployment roles, that would count as less unemployment?

ABBOTT: Unemployment would go down. Absolutely!

COSTELLO: The unemployment just goes down because you don't look for work?

ABBOTT: Absolutely it goes down. That's how you get to 9%. Otherwise it would be 17%. You don't want to read about 17% unemployment do ya?

COSTELLO: That would be frightening.

ABBOTT: Absolutely.

COSTELLO: Wait, I got a question for you. That means there are two ways to bring down the unemployment number?

ABBOTT: Two ways is correct.

COSTELLO: Unemployment can go down if someone gets a job?

ABBOTT: Correct.

COSTELLO: And unemployment can also go down if you stop looking for a job?

ABBOTT: Bingo.

COSTELLO: So there are two ways to bring unemployment down, and the easier of the two is to just stop looking for work.

ABBOTT: Now you're thinking like an economist.

COSTELLO: I don't even know what the hell I just said!