We all feel better, more confident, when the unemployment rate in Canada is low and getting lower. More people working, more money being spent on consumer goods, less dependence on government programs – it all makes sense.

In addition to tracking the unemployment rate, we also track the participation rate, which is basically how many people of working age (typically ages 15 to 65). The higher the participation rate, the better for the economy.

Unfortunately, we tend to use simple data to explain and then understand complex things.

In a report issued by the Vanier Institute called “The Current State of Canadian Family Finances” (February 2011), the author reports:

The official unemployment rate peaked at 8.7% in August 2009 and then fell slowly to 7.6% in December 2010. This good news is tempered by the fact that the unemployment rate remains much higher than the 6.1% recorded before the recession. The number of unemployed now stands at over 1.4 million, up by 298,700 from two years earlier, or by 27%.
There is some good news in that paragraph of things headed in the right direction, but it is also the case that we aren’t out of the woods yet. Looking at annual variances is not enough. Unemployment is still an issue given how much higher it is when comparing two years. 
  That said, one simple number representing unemployment is misleading when you consider this:While increased jobs does impact the unemployment rate favorably, it is also true that many Canadians have given up on the labour force market and would no longer be counted in the unemployment rate. The chronically unemployed are excluded from official statistics, an important number to truly understand that strength of the labour force and economy. Statistics also exclude those who have had to leave the job market for family reasons and those who have returned to school to “re-tool” themselves. While neither of these latter groups are looking for work currently, the factors that led them to leave the job market should be tracked because those reasons will be impact the participation rate.

If people are leaving the job market because they cannot find child care or afford it, or because they have to take care of elderly parents or a family member with a disability, these are important factors  to track and understand. People who return to school to re-invent themselves is a good thing, but just how many are doing that and will those numbers help address future labour force needs?

While these measures are not being addressed consistently and rigoursly, we do have estimates that the unemployment rate as cited above is under-reported by approximately 250,000 people.

Add to this the growing number of workers who are working part-time jobs involuntarily and we have more cause for concern. As the Vanier report indicates:

[The unemployment rate] does not take into account the number of part-time workers who are only working part-time because they can’t find full-time work. Involuntary part-time workers are another key source of  “hidden unemployment.” Between 2008 and 2010, the number of part-time workers working part-time because they could not find full-time work rose by almost 210,000 – from 711,200 in 2008 to 920,000 in 2010. The rate of involuntary part-time work – involuntary part-time work as a share of all part-time work – grew from 22.4% to 27.8% over this period.

That’s close to another million people who are at the very least “underemployed.” How should we count them and how do all of the above factors impact our understanding of the labour market and the economy?

The participation rate is another number to watch and think about. Are part-time workers included in the participation rate? Should they be included in the same way as full-time workers? Also the participation rate is critical because it represents the percentage of the working age population that basically supports the entire population. If the participation goes down, which it is projected to do over the next many years, what will that mean for health care for a growing population of seniors, for example.

It’s complex and we need to start collecting and reporting systematically on complex data because the solutions we need to build for society will be – you guessed it — complex solutions. Any politician or economist or business or community leader who tells you differently is doing so from an agenda that is far more narrow than it should be.

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