Corak in Context

May 5, 2012

1-minute read

Professor Miles Corak had a post on The Globe and Mail’s Economy Lab yesterday comparing measures of unemployment in Canada and the U.S. I remember learning in Economics 100 that the official Canadian and American unemployment rates are not directly comparable, in part because Statistics Canada includes 15-year-olds whereas the U.S. Bureau of Labor Statistics starts at 16.

Corak helpfully clarifies that the age difference has little effect on unemployment rates. To be officially classified as unemployed, one must be looking for work. The main difference is that Canada considers both “active” and “passive” job-search techniques, while the U.S. counts only the former as unemployed.

Corak’s concluding paragraph begins: “The Canadian unemployment rate would be lower if only those actively looking for a job were used to calculate the unemployment rate . . .” As a conditional statement, that is factually accurate. But it comes just as the Conservatives are proposing to cut off Employment Insurance recipients whose job searches are deemed to be insufficiently active.

A concern brought to my attention by Sam Boshra is that Corak’s wording can all too easily be (mis)interpreted as suggesting that Statistics Canada should adopt the more restrictive American definition of unemployment. Indeed, that is the message conveyed by The Globe’s headline: “A fast way to lower jobless rate: Use U.S. metrics.”

However, Corak has consistently argued that Canada’s official measure (R4) significantly understates unemployment. He is a proponent of the broader R8 measure of unemployment, which includes not only “passive” job-seekers but also discouraged workers, those waiting for jobs and part-timers who cannot get full-time work.

As far as I can tell, the only reason for applying the official U.S. measure to Canada is to produce an apples-to-apples comparison of the two countries. But even worse American unemployment is no excuse to define high Canadian unemployment out of existence.

Erin Weir is an economist with the United Steelworkers union and a CCPA research associate.

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