What Do People Do When They’re Unemployed?

Last night Jay Leno joked that only 500,000 people attended Bush‘s second inauguration, while 2 million were at Obama‘s. The reason, so he claimed, is that we now have so many more unemployed people.

Good joke, but is it correct? How do unemployed people spend their time? How does unemployment affect time use in the entire economy? What is the lost output from unemployment, and what is the utility loss?

Several of these questions couldn’t be answered until now due to lack of data. A new paper provides some surprising answers.

The unemployed use the time freed up from work for pay almost entirely in leisure and personal maintenance; they do no more household work than employed people. Similarly, in areas where unemployment is perennially high, there is less work for pay, more leisure, but no more household production.

But when unemployment suddenly rises, as in a recession, people shift from work for pay to household production; people don’t take more leisure time than before.

So if we would measure output to include production at home, we would infer that a recession doesn’t reduce total output by as much as we thought; and perhaps the utility burden of a short recession is not as severe as one might imagine.

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  1. Derick says:

    Very interesting. Generally speaking the government cures for economic problems are worse than the market readjustment. Just like someone with sleep deprivation is hurt less by the symptoms and fatigue and more by the Red Bull.

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  2. liberalarts says:

    Interesting. One thought that popped into my mind is that home production is costly, as least for me. Painting a room or the outside of the house uses not only leisure time but hundreds of dollars of paint and equipment. Fancier cooking involves purchasing more expensive ingredients. Mowing the lawn more often means more gas and so on. So, people who are in high unemployment areas or occupations may avoid extra home production, because they are poor.

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  3. Vessel says:

    While this indeed sounds encouraging, it’s hard to imagine all the “at-home” banks, insurance companies and car manufacturers that would pop-up with the most recent economic woes.

    Working from home may however add a surplus to the market in services, bringing down prices there and worsening the situation there too.

    On the upside, having time for yourself and your family may mean a higher sense of well-being. A key here is to tackle the downbeat sense that being financially constrained due to no work causes.

    This along with encouraging people to focus on education, art and other proven ways to increase one’s well-being may be an upside to a recession.

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  4. Michael says:

    People in the service industries might beg to differ.

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  5. Ezzie says:

    Not sure about others, but I spend my time taking care of my daughters (saving on babysitting), managing our finances and taking care of a few things around the house a little more closely – but it’s true, I do barely more than I was before at home.

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  6. discordian says:

    fortunately the longest I’ve been between jobs was about 2 months.

    I spent the time:
    – job hunting, mostly on-line and on the phone
    – doing jobs around the house
    – playing games on my computer

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  7. Zach says:

    What does this say about unobservable characteristics of the chronically unemployed and those that are employed? Do these results suggest that those that live “in areas where unemployment is perennially high” are lazy, since there is no higher level of household production? Perhaps the politically correct terminology would be that they “prefer leisure.” Similarly, the finding that an unemployment shock leads to increased household production while not affecting leisure suggests to me that the previously employed have an inherent desire to work.

    Disclosure: I did not read the paper, only the summarized results from this post.

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  8. Colin says:

    I am currently unemployed and attended Obama’s inauguration. I did not vote for him and quit my job so I am not an angry unemployed person who blames Bush for his plight. I spend my time reading and have done some traveling both here and abroad during my time off. I have basically treated it as a long vacation, it’s been great — especially if my job interview next week works out.

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