Unemployment rate gets rebranded

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Unemployment rate gets rebranded

Last Wednesday, Statistics Korea announced that the unemployment rate for the month of March hit a 17-year-high. The agency also introduced a new term, the “expanded unemployment rate,” presenting a figure that better captures the severity of youth joblessness.

Statistics Korea made the move after coming under fire for drawing an unrealistically rosy picture of the job market.

This new rate includes two groups of people that are not counted in the conventional unemployment rate - the time-related underemployed and the potential labor force. Time-related underemployed people are willing and able to work more hours but have only been able to find a part-time job. The potential labor force is made up of people who are either currently unavailable to work but seeking employment, or want to and can work but are not currently seeking employment.

Following this definition, the expanded unemployment rate hit 12.2 percent last month. The expanded youth unemployment for people aged between 15 and 29 also reached an alarming 24 percent. The official youth unemployment rate was only 11.6 percent.

Statistics Korea’s official unemployment rate only includes people who are available to work, seeking work and have not worked in the past week. Like many other countries, Korea follows the guidelines provided by the International Labor Organization (ILO).

This traditional definition overlooks many people who consider themselves jobless.

A recent graduate preparing to apply for a job at a large company, for example, may work part-time at a convenience store to support their living costs. Though the graduate may think they are unemployed, government statisticians would say otherwise as they work more than an hour a week.

But under the expanded definition, the graduate is unemployed. More specifically, they are time-related underemployed.

Likewise, a student preparing to take the civil service exam can also be seen as an unemployed member of the potential labor force.

While the expanded unemployment rate may be new, Statistics Korea has been releasing the same figures under a different name for more than three years. Since late 2014, the agency began including labor underutilization indicators in its monthly employment reports. Korea’s labor underutilization indicators, which range from levels 1 to 3, coincide with the ILO’s labor underutilization indicators LU2 to LU4.

Korea’s labor underutilization indicator 1 adds time-related underemployment to the official unemployment rate, while indicator 2 adds the potential labor force to the official unemployment rate. Last month, indicator 1 recorded 6.8 percent and indicator 2 hit 10.1 percent.

Indicator 3 is the aggregate unemployment rate, combining time-related underemployment with potential labor force. It is also the measure used when referring to the expanded unemployment rate.

“We took the terms from the ILO and categorized labor underutilization indicators from levels 1 to 3, but were told that they were too difficult for Koreans to understand,” explained an employee from Statistics Korea. “We decided to call indicator 3, which encompasses the broadest range, the expanded unemployment rate.”

Some argue, however, that even the expanded unemployment rate does not accurately illustrate the entire scope of unemployment. In June 2016, Hyundai Research Institute released a report that claimed the actual youth unemployment rate in August 2015 was 34.2 percent, almost four times higher than the official rate of 8 percent published by the statistics agency. The institute came up with the figure by adding young people working temporary jobs and not currently seeking or desiring employment to the expanded youth unemployment rate.

“The labor underutilization indicator numbers published by Statistics Korea follow the standards of the International Labor Organization,” argued Yoo Gyeong-joon, Statistics Korea commissioner at the time the report came out. “Counting workers who work temporary jobs as part of the unemployed doesn’t comply with international guidelines.”

The sensitivity surrounding calculation methods for unemployment statistics may indicate how weak the Korean job market is.

“Though youth unemployment is around 10 percent according to official statistics, the reality is much more alarming,” said Konkuk University finance Prof. Oh Jung-geun. “We can only increase the effectiveness and credibility of policy if statistics reflect the reality more accurately.”

BY HA NAM-HYUN [kim.eunjin1@joongang.co.kr]
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