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Editors’ note: 

For church leaders to be more effective in seeking the “welfare of the city” (Jer. 29:7), we should know what economic concepts mean, how they should be applied, and how they affect the local church. The purpose of the Economics for Church Leaders series is not to present a theology of economics, but rather to provide a basic level of understanding that will help church leaders think more clearly about how to apply their faith commitments to economics and public policy.

The Term

Unemployment

What It Means

Consult a dictionary and you’ll find a number of commonsense definitions: the state of being without a job; being without a paid job but available to work; and so on. But like many other economic terms, the dictionary definition can vary significantly from how the word is often used. For example, since your teenage daughter, your neighbor’s stay-at-home spouse, or your retired grandfather are without a job, are they considered unemployed? In each case the answer is the same: it depends.

According to the federal government, to be unemployed a person must (1) be jobless, (2) looking for a job, and (3) available for work. People are considered employed if they have a job (whether temporary, part time, or more). People who are neither employed nor unemployed are considered not in the labor force.

In America, the labor force consists of all persons 16 and older who are not serving on active duty in the military and are not confined to institutions such as nursing homes and prisons and either have a job or are looking for work. The labor force is made up of both the employed and the unemployed.

Unemployment therefore refers to anyone who doesn’t have a job, wants a job, is available to work, and is actively looking for work. That last part is particularly important since “discouraged workers” are not counted as unemployed.

Why It Matters

The Genesis account of creation tells us that from the beginning, humanity was created to work. God puts Adam in the garden to “work and keep it” (Gen. 2:15). For most of us, the work we do at our jobs is the primary way we serve our neighbor. It is also a way we glorify God. As Gene Veith says,

When we pray the Lord’s Prayer, we ask God to give us this day our daily bread. And he does. The way he gives us our daily bread is through the vocations of farmers, millers, and bakers. We might add truck drivers, factory workers, bankers, warehouse attendants, and the lady at the checkout counter. Virtually every step of our whole economic system contributes to that piece of toast you had for breakfast. And when you thanked God for the food that he provided, you were right to do so.

Because jobs can serve the needs of our neighbors and lead to human flourishing both for the individual and communities, they are the most important part of a morally functioning economy. Jobs are important to the flourishing of the individual, the community, and the economy—which is why unemployment should be a primary concern for Christians.

Unemployment should be a primary concern for Christians.

Unemployment can have harmful effects on communities, families, and a person’s subjective well-being and self-esteem. For example, the longer Americans are unemployed, the more likely they are to report signs of poor psychological well-being. According to a 2014 survey, about one in five Americans who had been unemployed for a year or more said they currently had or were being being treated for depression—almost double the rate among those who had been unemployed for five weeks or less.

A global survey in 2016 also found that young Americans who are unemployed have worse physical well-being than their employed elders. The survey found that in the United States, age has less of an influence on physical well-being than employment status—and unemployment has a particularly significant effect. Young adults (age 15 to 29) who were employed reported the same level (31 percent) of well-being as employed older adults (age 50 and older). But young adults who were unemployed had lower well-being (26 percent) than older adults who have jobs.

The most disturbing effect of unemployment is the despair that can lead people to take their own lives. One of every five suicides in the world can be associated with unemployment, according to a study published in The Lancet Psychiatry.

Long-term unemployment is not just a mental health crisis; it’s also a spiritual crisis. And the church is the only institution in America that can adequately respond. For reasons such as these, helping people find work uniquely their own contributes to the flourishing of the wider community and should be a concern for Christian leaders.

Other Details

Types of Unemployment

There is a variety of unemployment, including structural unemployment (e.g., jobs may be in Texas, but the workers who would take them are in California), frictional unemployment (e.g., workers are between jobs, such as when recent college graduates search for employment), voluntary unemployment (e.g., workers choose not to take a job at the going wage rate), and seasonal unemployment (e.g., workers at a ski resort being laid off during the summer). Under-employment is a related concept that refers to people who have a job that is part time or temporary, but they would like to work full time.

Because of frictional and voluntary unemployment, many economists believe there is a natural rate of unemployment in a healthy economy. In America, the natural rate is believed to be between 3.5 percent and 4.5 percent, so “full employment” is reached when less than about 4 percent of the population is unemployed.

What Are “Discouraged Workers”?

The government considers people to be “marginally attached to the labor force” if they want a job, have looked for work in the last 12 months, and are available for work. “Discouraged workers” are a subset of the marginally attached. Discouraged workers report they are not currently looking for work for one of four reasons:

  1. They believe no job is available to them in their line of work or area.
  2. They had previously been unable to find work.
  3. They lack the necessary schooling, training, skills, or experience.
  4. Employers think they are too young or too old, or they face some other type of discrimination.

How Unemployment Is Measured

Each month the Bureau of Labor Statistics issues the Employment Situation Summary, often called the “jobs report.” The most widely reported number in the jobs report is the unemployment rate.

Taken alone, the unemployment rate can be a misleading statistic, since it does not include discouraged workers. The unemployment rate can drop if people are discouraged from looking for a job and have not looked for employment in the last month.

A more significant statistic in the report is whether nonfarm payroll employment rose or fell and by how much. The economy needs to add between 100,000 to 150,000 new jobs just to keep up with population growth. If the number of new jobs is higher than the replacement rate, then the outlook for employment is positive; if the number is lower, then the outlook is negative, and economy is likely heading for a downturn.

Understanding Unemployment Benefits

Government provides unemployment benefits to offset the financial effect of losing one’s job. The most common benefit is a weekly stipend from unemployment insurance.

Unemployment insurance is a joint federal-state program that provides temporary benefit payments to employees who are out of work through no fault of their own. Each state sets its own unemployment insurance benefits eligibility guidelines, but people would normally qualify if they:

  • Are unemployed through no fault of their own. In most states, this means they have to have separated from their last job due to a lack of available work.
  • Meet work and wage requirements. People must meet their state’s requirements for wages earned or time worked during an established “base period.” (In most states, this is usually the first four of the last five completed calendar quarters before the time a claim is filed.)
  • Meet any additional state requirements.

Unemployment benefits are intended to partially replace lost wages, so the precise amount people receive will depend on what they previously earned. States use different formulas to calculate benefit payments, but all states take prior earnings into account in some way.

Some states provide an additional benefit amount to employees with dependents. These amounts tend to be small, as Aaron Hotfelder notes, and most states that provide this benefit offer $25 or less per dependent per week in additional benefits.

Unemployment benefits are taxable, and a person may elect to have up to 10 percent of a benefit amount withheld to pay federal income taxes.

Many states require filing unemployment benefits via the web, while some provide toll-free numbers or other ways to file. Learn more about your state’s program.

Unemployment insurance is funded by federal and states taxes (the Federal Unemployment Tax Act and the State Unemployment Tax Act), which are paid primarily by employers. Presumably, employers would pay a higher wage if they were not required to pay this benefit on a worker’s behalf, so unemployment insurance can be considered a form of indirect employee compensation.

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