Who Counts as Employed? Informal Work, Employment Status, and Labor Market Slack
According to the Bureau of Labor Statistics (BLS), an individual is employed if she reported having worked for pay or profit in the week prior to the survey. The rise of informal or nonstandard work arrangements in recent years raises the question of whether the BLS estimates of employment capture informal work, because such work may be intermittent and may go unreported for a number of reasons. For related reasons, estimates of labor market slack based on BLS data—such as slack hours among those employed part-time for economic reasons—might not take into account the fact that some individuals engage in informal work in their spare time. Such adjustments could have important implications for forecasts of wage and price inflation because these forecasts depend in part on estimates of labor market slack. Using original survey data, this paper investigates the implications of informal work for the measurement of employment status and labor market slack and considers whether the official BLS estimates may underestimate the U.S. labor force participation rate.