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Theoretical and Applied Economics
No. 3 / 2015 (604), Autumn

A labor utility index to measure worker welfare and labor market performance

David HUDGINS
University Corpus Christi, Corpus Christi, USA
Deniz GEVREK
University Corpus Christi, Corpus Christi, USA

Abstract. This study develops an asymmetric labor utility index (LUI) that is determined by worker preferences for labor and leisure, based upon the target employment preference for individual workers. The welfare index is illustrated for monthly data frequency that is consistent with the current employment data, although any time increment could be used. Once the utility values are computed for a representative sample of workers in a defined region, the average of the data is used to create an aggregate labor utility index (ALUI) for the regional or national labor market. This provides an additional empirical insight into current economic performance beyond the standard U-1 to U-6 labor underutilization measures regularly computed by the United States Bureau of Labor Statistics (BLS). The U-6 provides some measure of underemployment, but it does not define a welfare measure that allows comparing the labor market performance from month to month. Moreover, none of the BLS measures account for the disutility of over-employment. We generate an index that accounts for unemployment, underemployment, and overemployment when determining the current overall aggregate labor market welfare in the region.

Keywords: Aggregation, Labor Utility Index, Overemployment, Underemployment, Unemployment.

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The Economicity. The Epistemic Landscape, Marin Dinu, 2016

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