U.S. Unemployment Varies Significantly Based on Income Levels

The U.S. official unemployment rate was 9.7% in January, 2010. The number of unemployed persons in the country stood at 14.8 million.

The distribution of unemployment among the major worker groups:

Whites= 8.7%
Blacks = 16.5%
Hispanics =  12.6%
Asians= 8.4%
Adult Men=  10%
Adult Women = 7.9%
Teenagers= 26.4%

While the above distribution gives us some indication of unemployment rates among various groups it does not tell us how income levels affect unemployment. For example, it does not tell us which group of workers are the most and least affected.

A recent research paper from Center for Labor Market Studies,Northeastern University, Boston, Massachusetts analyzed the unemployment issue from an income level perspective using the fourth quarter 2009 data . The study showed that jobs losses disproportionally affected American workers.

Charts:

US-Unemployment-Rates-by-Income-Levels

us-ur-declies.JPG

Source: Labor Underutilization Problems of U.S. Workers Across Household Income Groups at the End of the Great Recession: A Truly Great Depression Among the Nation’s Low Income Workers Amidst Full Employment Among the Most Affluent

By Andrew Sum, Ishwar Khatiwada, With the Assistance of Sheila Palma, Center for Labor Market Studies,Northeastern University, Boston, Massachusetts

The following are some of the key takeaways from the study:

  • The total number of unemployed and underemployed has doubled in the last two years
  • Four year college graduates, many managers, government employees,  professionals are well protected from job losses
  • Blue-collar workers particularly in the construction sector, teenagers and black men have higher unemployment rates
  • From the chart above, we  can infer that workers in the top two deciles have unemployment rates of just 4.0% and 3.2%
  • Workers in the lowest decile – those earning $12,499 or less – faced a Great Depression era unemployment rate of about 31% and the second lowest declie had an unemployment rate of about 20%
  • Both Unemployment and Underemployment rates increase dramatically from high income to low income levels

The study above clearly shows that lower-income Americans are affected greatly by the current recession while people at the top of the pyramid have almost negligible unemployment rates. Since the majority of the low-income workers are employed in the service sector, they face a further bleak future as consumer spending is still down. The study confirms that the headline rate unemployment rate of 9.7% is vastly misleading since it is much worse than that for low-income workers. Most of the Wall-Street bankers, government employees and other professionals have escaped this recession unscathed while it is not the same case with the rest of the workers.

More on this topic (What's this?)
Declining Participation Rate A Function Of A Weak Labor Market
The Myth Of High Structural Unemployment
Read more on Unemployment (U.S.), Income at Wikinvest

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