Because of three specific distortions in the way it is calculated, the official unemployment rate is overstated. First, the government unemployment figure counts the unemployed looking for part-time work as full-time unemployed, even though a person must be both able and willing to work to be counted in the labor force. Unemployed people looking for part-time work are actually partly unemployed and partly out of the labor force altogether.
Second, a significant percentage of the officially unemployed are in reality working “off the books,” being paid in cash without intercession of a tax collector. The official unemployment rate is further distorted by the number of workers who have permanently dropped out of the legitimate labor force to work in the subterranean economy as drug pushers, prostitutes, racketeers, etc.
Finally, some of the unemployed have little or no intention of seeking work; they have merely registered as unemployed in order to meet the requirements of certain government welfare programs. Then there are those who defer taking a job until their unemployment insurance runs out.
The combined effect on the unemployment rate is substantial. Seasonally adjusted, the official unemployment rate for April 1978 was 6.0 per cent. The actual rate may be as low as 4.5 per cent.