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Q & A: Unemployment Numbers

Posted April 20, 2012 | Categories: Q&A
1.Hawaii’s unemployment rate seems to always be below the US unemployment rate. How long has this been going on?

Since the mid-1970s. It’s below the US rate in good time and in bad times.Consider the February 2012 unemployment rates for Hawaii and the US:

Hawaii: 6.4%

US: 8.3%.

A difference of 1.9%..

2. So what’s responsible for the big difference?

It’s not because Hawaii has a better job market than the U.S. Finding a job in Hawaii requires significant search. Limited market for numerous professional jobs due to the small population and specialized industries. The MAIN reason for the difference is Hawaii’s health insurance law: The Pre-Paid Health Care Act. It requires that employers provide health insurance to any employee who works more than 20 hours per week. The law is one of the reasons why Hawaii is among the top three US states in terms of the percentage of the population with health insurance. But it also provides incentives to employers to break full-time jobs into two part-time jobs to avoid the requirement of providing costly health insurance. This tends to increase the number of jobs and lowers the unemployment rate.

3. OK, but what happens to full-time jobs?

That’s the negative side effect of the state’s health insurance law: Fewer full-time jobs. More people have part-time jobs who really want full-time jobs. One way to verify this is to look at an alternative measure of the unemployment rate known as U-6. This measure counts people who have part-time jobs and want full-time jobs as unemployed. When we look at this measure the unemployment gap between Hawaii and the US becomes much smaller:

Hawaii: 15.4%

US: 16.2%

Just .8% difference.

4. So is Hawaii’s health insurance law good for the State?

Yes, it’s helped to insurance over 90% of the population. And providing health insurance for its population is something that every wealthy society should do. Even better, however, would be if Hawaii and all the other states decoupled the provision of health insurance from the job market. The linkage is the source of many of the problems in the US health care market.

-- Carl Bonham



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