Unemployment or Out of the Labor Force: A Perspective from Time Allocation and Life Satisfaction

Availability for work and engagement in active job search have been the conventional criteria to distinguish the unemployed from those not in the labor force. In this paper we use American time use survey data 2012-2013 to compare the demographic characteristics, time allocation and life satisfaction between the unemployed and three subgroups of those out of the labor force. The three subgroups include the retired, the disabled, and those who are out of the labor force but not retired or disabled (NLFNRND). We find that despite differences in time spent on job search, NLFNRND males share similar demographic characteristics, time allocation and life satisfaction as unemployed males. By examining the labor market status of the sample population in their CPS interviews, we also find that males who were NLFNRND or unemployed at the time of CPS interviews have similar transition rates to employment by the time of their ATUS interviews about two to five months later. By contrast, NLFNRND females spend as little time on job search as their male counterparts, yet their demographics characteristics and time allocations show high opportunity cost of substituting search and market activities for child care and nonmarket work. Compared to NLFNRND males, NLFNRND females have higher life satisfaction in their current status, and lower transition rates to employment. Both NLFNRND males and females have drastically different demographics, time allocation and life satisfaction from the retired and disabled, the other two subgroups of those not in the labor force. We argue that engagement in active job search reflects only a tiny fraction of time allocation patterns, and thus may not capture the full opportunity cost of time for employment considerations. We advocate a more sophisticated criterion considering time allocation and life satisfaction in distinguishing between being unemployed and not being in the labor force. JEL Codes: J22, J64, E24