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Why Is Hidden Unemployment a Problem?
By Dennis Hartman
When economic analysts and politicians discuss the status of the economy, one of the issues they will often cite is the unemployment rate. This refers to the percentage of workers who are out of a job but actively seeking one. However, official unemployment figures leave out several groups of workers who constitute hidden unemployment. Hidden unemployment is a strain on these workers and the economy as a whole.
Hidden unemployment refers to all unemployed workers who aren't counted in government unemployment figures. It includes workers who stop looking for a job and allow their unemployment insurance benefits to expire, as well as consumers who manage their households instead of working when they would prefer to have a second income. Hidden unemployment also includes contingent workers such as freelancers and independent contractors who aren't eligible for unemployment benefits but still find themselves unable to find work despite looking for it.
Hidden unemployment is a serious crisis for the unemployed workers it applies to. Many of these are individuals who have some form of training, work experience or skills but can't find work in their given fields despite their best efforts. Hidden unemployment means real financial pressure for anyone with debts such as student loans, a mortgage or an auto loan. It also keeps those if affects from spending money to drive the consumer economy forward, which has a broader impact.
Hidden unemployment poses a problem when lawmakers attempt to take steps to alleviate unemployment. For example, if the federal government offers job creation grants to individual states, it may do so based on the official unemployment numbers in each state. A state with a relatively high rate of hidden unemployment would not receive enough to effectively address the issue. In addition, government spending limits or budget restrictions based on unemployment figures will go into and out of effect based only on recorded unemployment, regardless of trends in hidden unemployment.