(DP 2014-01) Just how good is unemployment as a measure of welfare? A policy note

Abstract

The government is rightly concerned with employment generation to make growth inclusive. The use of the open unemployment rate to measure its success, however, is misplaced. In a developing country with a large informal sector and in the absence of unemployment insurance, open unemployment is primarily a middle-class phenomenon: the unemployed are not predominantly poor, and the poor are not predominantly unemployed. Measures of productivity and shifts of labour across sectors may contain more information.

JEL Codes: J21, I32