Truthfully, this is not particularly a new idea. For a long time, I, and others, have been pointing out that the data about the economy and jobs does not reflect how bad it really is--and this was true way before the financial crisis. But, drumroll, a little academic cover joins the chorus.
David Leonardt has a little write-up:
A new academic paper suggests that the unemployment rate appears to have become less accurate over the last two decades, in part because of this rise in nonresponse. In particular, there seems to have been an increase in the number of people who once would have qualified as officially unemployed and today are considered out of the labor force, neither working nor looking for work.The paper can be read here. It is a deep dive into a concept known as "rotation group bias"...this is a very fun topic to bring up say on a first date or with your dentist just before the drill gets turned on.
The trend obviously matters for its own sake: It suggests that the official unemployment rate – 6.2 percent in July – understates the extent of economic pain in the country today. That makes intuitive sense. Wage growth is weak, and Americans are pretty dissatisfied with the economy, according to other surveys. The new paper is a reminder that the unemployment rate deserves less attention than it often receives.
Yet the research also relates to a larger phenomenon. The declining response rate to surveys of almost all kinds is among the biggest problems in the social sciences. It’s complicating our ability to understand how people live and what they believe. “It’s a huge issue,” says Alan Krueger, a Princeton economist and one of the new paper’s three authors. (Mr. Krueger, who recently spent two years as the chairman of President Obama’s Council of Economic Advisers, founded the Princeton University Survey Research Center in the 1990s.)
Why are people less willing to respond? The rise of caller ID and the decline of landlines play a role. But they’re not the only reasons. Americans’ trust in institutions – including government, the media, churches, banks, labor unions and schools – has fallen in recent decades. People seem more dubious of a survey’s purpose and more worried about intrusions into their privacy than in the past.[emphasis added]
But the point really is: the surveys are not giving accurate data.
And because the data is not accurate it is not measuring how bad it really is out there--something most of us can feel by talking to our family and friends.
For many years, I've written about the very bad idea of tying wage hikes to the Consumer Price Index because the CPI does not capture the full cost of food, housing, gas, minimal clothing and the other stuff you need to live.
This study just shows that it's a lot worse for people than statistics the government is spitting out.