Thursday 4th of June 2020 07:40:00 PM GMT

Oakland Unemployment Rate Low Because More People Left The Workforce

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(Last Updated On: January 25, 2019)

Is Oakland’s Unemployment Rate really 3 percent?

Much has been made of Oakland’s record low unemployment rate. Everyone from Oakland Mayor Libby Schaaf to pretty much anyone promoting Oakland, to crime stat junkies, have pointed to the low rate of unemployment as the driver for all kinds of good things from the 20-year-low 2018 rate of 68 murders, to the increase in market rate housing.

But the current unemployment rate, estimated at 3.20 percent (according to The Bureau of Labor Statistics), hides a not-much-talked-about fact: it reflects the number of people who’ve left the Oakland workforce.

To understand why, it’s important to understand what unemployment is and what it reflects.

Will Downtown Offices help solve Oakland's problem?

Will Downtown Offices help solve Oakland’s problem?

The basic definition of “unemployment “ is this:

“The unemployment rate is defined as the percentage of unemployed workers in the total labor force. Workers are considered unemployed if they currently do not work, despite the fact that they are able and willing to do so. The total labor force consists of all employed and unemployed people within an economy.”

But what happens when Oaklanders who were once in jobs that required a W2 form, in other words, employed, quit? Well, they file for unemployment. Historically, that’s how America determined the rate of unemployment in Oakland and the country. Now, it’s vastly different, and this is where the problem that created our low unemployment rate started. Here’s where we look at the self-employment economy and the “gig” economy, within it.

33 percent of American workers are self employed according to figures drawn from a FreshBooks estimate of 2019 self-employed workers and the Bureau of Labor Statistics (BLS) estimate of Americans working full time jobs in 2019, or 42 million divided by 126 million to get the rate. (FreshBooks is an accounting software firm that produces an annual report on self-employment.)

It’s not that America suddenly went anti-corporate, but the emergence of Internet-based work made “being your own boss” easier than ever before. But it also has caused a giant statistical problem America has not solved: all-but useless economic and employment data.

In Oakland, the last reliable set of census data in 2010 reported that 10.4 percent of our population was self-employed. Going back to 2000 and the rate of self-employed at 8.2 percent, and then forecasting to 2020, we have just over 12 percent of the Oakland workforce self-employed. But then the FreshBooks estimate of 33 percent, or one-out-of-every-three, points to an explosion of work in the self-employed area.

So that means we have a low rate of employment, right? Well, not because of that; in California, according to the Employment Development Department, a self-employed person is considered not employed. That is, you’re not hired to provide a service. Bottom line, you’re not counted in the ranks of the employed. That’s a lot of people, especially when you consider the “gig” economy.

What Is The Gig Economy in Oakland?

According to Whatis.com, the “gig economy” is…

“A free market system in which temporary positions are common and organizations contract with independent workers for short-term engagements. The trend toward a gig economy has begun. A study by Intuit predicted that by 2020, 40 percent of American workers would be independent contractors.”

So, considering the size of the self-employment economy and the gig economy, which, for all practical purposes, are about the same portion of the total number of Americans working in some kind of way, it’s fair to say that in the Oakland contest, the number of persons in the self-employment economy is about 33 percent, or one of every three.

So, if we look at what’s happened to Oakland’s workforce, and the fact that persons in the self-employment economy aren’t considered employed, and yet don’t file for unemployment, we have to consider them as having dropped out of the workforce. That would go a long way toward explaing why Oakland’s unemployment rate, and that of California and America, is so low.

Yet, that way of work, the gig economy, is fast becoming the norm. So, much so, only last year did the Federal Government start studying it.

The first official BLS reading, as of June 7th of 2018, is 16.5 million Americans hold jobs in the gig economy. That number includes Uber, Lyft and Airbnb contractors, YouTube Partners, and Amazon Affiliates. The trouble with the BLS number is that it’s based on a survey that a person could opt-out of taking, and “This information was obtained from the Current Population Survey (CPS), a monthly sample survey of about 60,000 households that provides data on employment and unemployment in the United States. Data on contingent and alternative employment arrangements were collected periodically in supplements to the CPS from February 1995 to February 2005. The May 2017 supplement was sponsored by the U.S. Department of Labor’s Chief Evaluation Office.”

Thus, we have the BLS data producing a percentage of persons in the gig economy that’s less that what was arrived at by other organizations. So, for the purpose of reflecting what’s generally reported – that about a third of America’s working in the self-employment / gig-economy – Oakland’s rate is at 33 percent. But what does that mean?

It means our real employment picture is muddled and confusing, and no where near the perfect economic situation a 3 percent rate would imply. It’s far to say (or this blogger will say) that we’re in big trouble because we don’t understand exactly what’s happening, but we see change. Housing prices are dropping fast in some regions, and after years of gains. Tech employees are increasingly being laid off. We know there’s a problem, even if the once-reliable unemployment data doesn’t reflect it.

And then there’s the homeless problem in Oakland.

If there are 6,000 homeless in Oakland, and the employed population is 183,285 using the only reliable number we have from the 2010 Census, then just about 3.2 percent of what would be the working population is homeless. They’re also not counted in the employed workforce.

So, we have a problem where, fully, approximately 35 percent of Oakland’s working population is, for all practical purposes, out of the employment system. That should send off alarm bells to any right-thinking economic development officer in Oakland. What are we doing to make sure we’re gainfully employing Oaklanders?

Right now, Oakland Mayor Libby Schaaf has been content to lean on the idea that the tech sector will save Oakland, but the reality is, tech has only made Oakland’s workforce situation worse and its homeless situation a crisis.

Meanwhile, Oakland’s once vaunted economic development effort has yet to score a big win outside Square announcing it would lease 356,000 square feet of office space in Oakland’s former Sears building now called Uptown Station. Fine, a step in the right direction for tech, but it says nothing about the need to fill Oakland’s economic development needs with basic industry jobs, in other words, jobs anyone can do that pay well.

Stay tuned.

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