February 2, 2006
Study Finds that Labor Department Overstates Share of Working Americans By 1.4 Percentage Points
For Immediate Release: February 2, 2006
Contact: Lynn Erskine 202-293-5380 x115
Washington, DC - The most important source of data on the
U.S. labor market may be systematically overstating employment, according to a
new report by the Center for Economic and Policy Research. The report, "Missing
Inaction: Evidence of Undercounting of Non-Workers in the Current Population
Survey (CPS) ," found that the CPS appears to be overstating the share
of American adults who are working by about 1.4 percentage points.
The report by economists John Schmitt and Dean Baker noted
that a large and growing portion of the population does not respond to the CPS,
and that the non-responders appear less likely to be employed than people who
take the survey. This overstatement is significant because the CPS is the source
for the government's most important statistics on the labor market, including
the unemployment rate, poverty rate and health-insurance coverage.
"Current labor market estimates appear to be
overstating the share of working Americans by 1.4 percentage points. This
corresponds to roughly 3 million fewer people working - almost as big a drop in
employment as in a typical recession," said John Schmitt, CEPR economist
and lead author of the report.
The study assessed employment rates among non-responders
by comparing employment rates in the CPS with employment rates in the 2000
Census. In 2000, 8 percent of the population did not respond to the CPS. In
contrast, only 2 percent did not respond to the 2000 Census. After adjusting for
the errors in reported employment in the Census data (and excluding the prison
population), the study found that employment rates were 1.4 percent lower
overall in the Census than in the CPS.
The study also found that the CPS overstates employment
rates for blacks by about 2 percentage points, with the gap for younger black
men as high as 8 percentage points. The CPS also appears to be overstating
employment rates of younger Hispanic women by about the same margin, and younger
Hispanic men by 3 to 6 percentage points.
Since the CPS is also the source of official statistics on
poverty rates and health-insurance coverage, the report warns that these widely
reported numbers could also be overly optimistic. Non-working adults are more
likely to be in poverty and less likely to be covered by health insurance.
Therefore, if non-working adults are disproportionately excluded from the CPS,
then the survey is understating the true poverty rate and overstating the share
of the population covered by health insurance.
The CPS is a monthly survey of households conducted by the
Bureau of Census for the U.S. Bureau of Labor Statistics.
To read the report, see:
The Center for Economic and Policy Research is an independent,
nonpartisan think tank that promotes democratic debate on the most
important economic and social issues affecting people's lives. CEPR's
Advisory Board of Economists includes Nobel Laureate economists Robert
Solow and Joseph Stiglitz; Richard Freeman, Professor of Economics at
Harvard University; and Eileen Appelbaum, Professor and Director of the
Center for Women and Work at Rutgers University.