Friday, February 26, 2016

You Can't Leave out Prisoners! Distorted Unemployment Numbers

In determining the unemployment rate, excluding the institutional population is not a trivial choice.

Think about it: A large fraction of the institutional population consists of young black males. A segment of the population which, if not in prison, would have a relatively high proportion of unemployment. The same applies to the military. So that means that:
- An administration can decrease the reported unemployment rate simply by incarcerating more young black men.
- Same applies to recruiting that population into the military.

There is little doubt that if fewer people (and young black men in particular) were in prison, GDP would be higher and so would reported unemployment.

So, if you're evaluating either the state of the economy or the effectiveness of an administration, excluding the institutional population (and, in fact, giving them no consideration of any kind in determining the rate) gives an overly favorable picture.


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