Low unemployment, check. Low underemployment, not check. | Washington Post | 04.05.2016
Underemployment, called “u6” by the Bureau of Labor Statistics, combines three groups: the unemployed, part-time workers who’d prefer full-time jobs (workers who are literally underemployed), and “marginally attached” workers (a small subset of people neither working nor actively looking for work, but who would be willing to work if there were more good opportunities available).
The big story in the rise of u6 was and remains the involuntary part-timers (IPTs). Without at all dismissing the uniquely stark psychological costs of unemployment (especially long-term joblessness), when computing labor market slack, it actually makes more sense to think in terms of desired hours worked. Someone who wants to work full-time can, in reality, work between zero hours (unemployed) and 40 hours (fully employed). This continuum, versus the 0–1 metric of unemployed/employed, provides a more nuanced and accurate measure of labor market slack.
What’s important, albeit obvious, here is that what drove u6 up so high was the big, negative demand shock known as the Great Recession. That’s a cyclical increase, one that can be (and is being) reversed by strong job growth, as opposed to a structural increase, one we’d expect to persist even as the economy strengthened.
Some who disagree with that assessment blame the rise in IPTs on Obamacare. Since the law includes employer mandates, phased in over 2015–16, that apply to firms with over 50 full-time workers, some argue that the Affordable Care Act (health-care reform) is already causing employers to move full-time employees into part-time work to avoid the mandate.
Not so. The Bureau of Labor Statistics breaks data on part-time work into two categories: voluntary and involuntary. The data clearly show a decline in IPTs and an increase in voluntary part-timers.
the evidence suggests that Obamacare is not a factor in the elevated numbers of IPTs (nor, by extension, with the elevated rate of u6). Which makes sense; the vast majority of firms and workers affected by the mandate already have coverage (well under 1 percent of employees work 30 to 34 hours a week and are employed by businesses affected by the employer mandate and do not have insurance).
The key point here is that, since the elevated u6 problem is largely a cyclical problem, it should continue to come down as the job market tightens. I estimate that if job growth continues at its current pace of around 200,000 per month, we’ll hit 8.5 percent by early 2017. Should job growth accelerate to, say, 250,000, we could hit that (alleged) threshold by late this year.
