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MOM Doesn’t Look at Jobless Rate Alone

The Straits Times (31 December 2009) : MOM doesn’t look at jobless rate alone

The Straits Times (28 December 2009) : Don’t forget the invisible jobless

MOM doesn’t look at jobless rate alone
- The Straits Times, 31 December 2009

     We refer to Ms Sue-Ann Chia’s commentary, “Don’t forget the invisible jobless” (Straits Times, 28 December 2009) which asked for unemployment figures that include those who have temporarily dropped out of the labour market.  

2.   As Ms Chia pointed out, the Ministry of Manpower (MOM) adopts labour statistics which are in line with international practices. More specifically, we have adopted the International Labour Organization’s definition of unemployment. This allows us to objectively benchmark how our labour market is doing, with those of other countries.

3.   MOM does not rely on the unemployment rate alone to assess the performance of the labour market. We also look at the employment rate, which refers to the proportion of the working-age population who are employed, regardless of whether they are economically active, and hence will include job seekers who have stopped looking for work. The employment rate for residents aged 25 to 64 was 75.8% in Jun 09, down from the record high of 77.0% in Jun 08, due mainly to the recession. Nevertheless, this is still higher than in previous downturns, when it declined to 72.1% in Jun 99 and 71.8% in Jun 03. This is also higher than the 72.5% in the US.

4.   Many efforts have been put in to help all jobless Singaporeans. Those who are out of a job, can go to any of the five Community Development Councils (CDCs) island-wide to seek job and training assistance. Some 42,000 workers have found jobs through the Skills Programme for Upgrading and Resilience (SPUR).

Don’t Forget the Invisible Jobless
- The Straits Times, 28 December 2009

It makes sense to shed more light on the economically inactive

The Manpower Ministry said earlier this month that the resident unemployment rate in Singapore hit 5 per cent in the third quarter, lower than the 6.2 per cent during the 2003 Sars crisis.

The actual proportion of people unemployed in any economy in any given period has always been notoriously difficult to pin down. This is in part because the unemployment rate is calculated based only on what is called the number of 'economically active'.

The 'economically active' refers to those who are actively working, or available for work and in search of work.

Two groups are left out from the calculation: One, individuals who have deferred job hunting to attend courses; and two, 'discouraged workers' who have stopped searching for work believing that it will be in vain.

Laymen would think of both groups as being out-of-work, but they are not included in the official jobless rate.

To be sure, this practice is not peculiar to Singapore. It is universal, and is derived from the International Labour Organisation's definition of unemployment.

Economists explain that the definition makes sense as people who are not willing to work should not be considered jobless.

But they also agree that the standard definition of unemployment has its shortcomings. For example, discouraged workers may well include those who do want to work, but have dropped out of the job market - temporarily - due to poor job prospects.

'This screws up the interpretation of the unemployment rate, leading to some perverse effects,' says economist Choy Keen Meng from the Nanyang Technological University.

For instance, the jobless rate could actually be lower than expected during a downturn, as more people quit the labour force and stop looking for work. It could also be higher than expected during boom times, as more people stir themselves from economic inactivity and start looking for work.

These people who skew the jobless rate are thus referred to as the 'hidden unemployed'. They are unaccounted for in unemployment statistics not only in Singapore, but also in countries such as the United States, which is facing its worst unemployment crisis in decades.

There has been ongoing debate in the US as to whether discouraged workers should be included in the official jobless data to reflect the depths of the unemployment situation.

The issue has not been resolved, but in the interim, the US government does release figures offering a broader measure of unemployment. One innovation is the concept of those 'marginally attached' to the labour force - that is, people who are no longer looking for work but were earlier. If this group was included, the US jobless rate would have been 17.2 per cent last month, higher than the 10 per cent recorded using the conventional method.

In Singapore, the Government releases only one unemployment figure using the conventional method of calculation.

It does release figures on the number of discouraged workers, but this is done only annually, and the figures are not factored into the quarterly unemployment rate.

I did some back-of-the-envelope calculations using June's data (No comprehensive data is available yet for the third quarter). The number of discouraged workers and those who are jobless but attending training courses totalled 53,600. Add that to the jobless number, and the unemployment rate could jump to 8.3 per cent, instead of the 5.9 per cent arrived at using the conventional route.

That the unemployment rate was kept low testifies to the tremendous effort the Government and the labour movement expended over the past year to get retrenched workers into assorted training and skills upgrading programmes. Those who are undergoing training are in fact improving the prospects of their future employment, though they may be jobless now.

But I believe there is a place for unemployment figures that give a fuller picture by including the hidden unemployed. Without that fuller picture, cheers of victory when the unemployment situation improves may be premature. As it is, the erstwhile focus on saving jobs has already shifted to persuading companies and workers to be more productive as the economy recovers.

It is not only those who are officially recognised as jobless who need help. The invisible jobless need help too.

Consider the discouraged workers. This June, their numbers surged to a 10-year high of 11,100. Most are in their 50s and above, and tend to be not well-educated. Not only are they left out of jobless data, most have also fallen off the radar screens of job placement agencies.

This is a real pity, because chances are a number of them would still want to work if jobs came their way. While some among them might emerge again in the workforce when the economy improves, something still ought to be done to encourage the discouraged.

The jobless who are attending training courses are another big group. My estimate, using a combination of the June labour force data and the 2005 census, is that there could be as many as 42,500 people who heeded the national call to head back to school to improve their skills and job prospects.

Some of these would be counted among the official unemployed, if they are also actively searching for job openings while undergoing training. The problem is, we don't know how many fall into this category, and how many would search for a job if they had greater assurance of finding one.

For the sake of more targeted policy measures, for the sake of researchers who wish to compile better statistics, for the sake of union leaders who want to be sure their assistance programmes are working, more light should be shed on Singapore's invisible jobless brigade.