“Discouraged” By The Media (Again)

In his recent article on how government rigs its statistics, John Crudele writes:

Thanks to a tiny tweak in definitions made by the Clinton White House back in 1994, Obama’s life is a whole lot easier. […]

Back in ’94, the definition of a discouraged worker was changed. Until then, Labor would call people’s houses and ask the adults if they were employed or not. If someone said they weren’t even looking for a job because they were too discouraged, that pre-1994 person was considered unemployed and included in the figures.

The Clinton administration decided that unemployed people couldn’t be discouraged — and not job-hunting — for more than 12 months. If a person hadn’t searched for a year he was simply not included in the U-6 or other measures of joblessness.

Yes, the definition of “Discouraged” was tweaked. No, the Clinton administration had absolutely nothing to do with it.

From a few documents BLS was kind enough to send me:

Given these reasons, an effort to redesign the CPS was begun in 1986. From 1988 through 1991, a series of research projects were conducted to guide the development of the revised CPS. Included in this research were two large-scale tests of alternative versions of the questionnaire collected using centralized computer-assisted telephone interviewing with samples of households selected through random digit dialing. The result of these tests was a completely revised questionnaire designed to be collected with an entirely automated survey instrument.

So this particular redesign actually began under Reagan. Moving on:

June 1990. The first of a series of experiments to test alternative labor force questionnaires was started at the Hagerstown Telephone Center. These tests used random digit dialing and were conducted in 1990 and 1991.

January 1994. A new questionnaire designed solely for use in computer-assisted interviewing was introduced in the official CPS. Computerization allowed the use of a very complex questionnaire without increasing respondent burden, increased consistency by reducing interviewer error, permitted editing at time of interviewing, and allowed the use of dependent interviewing where information reported in one month (industry/occupation, retired/disabled statuses, and duration of unemployment) was confirmed or updated in subsequent months.

And the reason for the change also had nothing to do with Clinton:

The former measurement of discouraged workers was criticized by the Levitan Commission as too arbitrary and subjective. It was deemed arbitrary because assumptions about a person’s availability for work were made from responses to a question on why the respondent was not currently looking for work. It was considered too subjective because the measurement was based on a person’s stated desire for a job regardless of whether the individual had ever looked for work. A new, more precise measurement of discouraged workers was introduced that specifically asked if a person had searched for a job during the prior 12 months and was available for work. The new questions also enable estimation of the number of people outside the labor force who, although they cannot be precisely defined as discouraged, satisfy many of the same criteria as discouraged workers and thus show some marginal attachment to the labor force.

The Levitan Commission was established in 1978 and released its findings in 1979, to put in perspective how misguided it really is to assign this definitional change to Clinton.

And, finally:

In 1994, major changes to the Current Population Survey (CPS) were introduced, which included a complete redesign of the questionnaire and the use of computer-assisted
interviewing for the entire survey. In addition, there were revisions to some of the labor force concepts and definitions, including the implementation of some changes recommended
in 1979 by the National Commission on Employment and Unemployment Statistics (NCEUS, also known as the Levitan Commission). Some of the major changes to the survey were:

b) The addition of two, more objective, criteria to the definition of discouraged workers. Prior to 1994, to be classified as a discouraged worker, a person must have wanted a job and been reported as not currently looking because of a belief that no jobs were available or that there were none for which he or she would qualify. Beginning in 1994, persons classified as discouraged must also have looked for a job within the past year (or since their last job, if they worked during the year), and must have been available for work during the reference week (a direct question on availability was added in 1994; prior to 1994, availability had been inferred from responses to other questions). These changes were made because the NCEUS and others felt that the previous definition of discouraged workers was too subjective, relying mainly on an individual’s stated desire for a job and not on prior testing of the labor market.

Beyond taking a gratuitous and demonstrably inappropriate swipe at Clinton, Crudele implies that the number of people unemployed or underemployed today would be significantly higher without “Clinton’s” change:

How high would the U-6 underemployment rate be if these discouraged workers were added back in? ShadowStats.com, which tracks government figures, thinks the broadest jobless rate would be 22.9 percent if President Bill’s folks hadn’t redefined what it means to be unemployed. [Ed. note: As you’ll see immediately below, the redefinition is not nearly as radical as Crudele makes it out to be.]

Yes, the number of discouraged workers was reduced after Labor (having nothing to do with Clinton) changed its definition of the word. However, let’s consider the change Crudele is harping about, to wit the added requirement that an interviewee had “Looked for work some time in last 12 months (or since last job if employed within past year).” Is it Crudele’s argument that an unemployed person who has not looked for work for over 12 months is even remotely (“marginally”) attached to the labor force? Think about that. I mean, really, is that an argument anyone wants to make?

Here’s a side-by-side comparison of the changes Labor made in 1994 (thanks again to the good folks at BLS sending it along). Note that Discouraged Workers were considered “not in the labor force” both pre- and post-1994.

[Importantly, note the improvement in data collection – from 1/4 of the sample, tabulated quarterly to the entire sample, tabulated monthly. That bastard Clinton was trying to get more accurate and reliable information! Damn him!]

See what Crudele’s all worked up about? Me neither. But these are slow summer weeks and there are column inches to fill. That doesn’t, however, mean that the facts should take a vacation.

Finally, I’d have to disagree with Mr. Crudele’s claim that the U-6 numbers are “buried deep” in the monthly jobs report. Unless, of course, by “buried deep” he means one click away on the main Employment Situation Report page (Click on Table A-15). “Buried deep,” to me, is more the average price of “Steak, round, USDA Choice, boneless, per lb. (453.6 gm)” in May 2006 (it was $3.89). U-6? Not buried.

Follow me on the Twitter: @TBPInvictus

Sources:
The CPS After the Redesign: Refocusing the Economic Lens, Anne E. Polivka, Bureau of Labor Statistics and Stephen M. Miller, Bureau of Labor Statistics, December, 1994, Revised March, 1995
Current Population Survey Technical Paper (CPS TP66), October 2006
Employment and Earnings, February 2006

Special thanks to the folks at BLS for being so very responsive in tracking down all the relevant documents.