Earlier this month, polling agency Gallup released its 2011 global unemployment statistics for 148 countries. Of the nations Gallup surveyed, nine had unemployment rates below 5%. The majority are in Asia, with the remainder in central or eastern Europe. 24/7 Wall St. reviewed these nine countries to determine the underlying causes of their extremely low jobless rates.
We looked at these countries in light of the fact that some economists believe that unemployment of 5% or less is considered “full employment.” The argument is that less than 5% unemployment is impossible once normal turnover, job deferment and retirement are taken into account. In fact, the agency’s findings highlight the problem with comparing unemployment levels across nations; similar unemployment rates in different countries do not necessarily mean conditions are the same.
After analyzing the data, 24/7 Wall St. concluded that only a minority of the countries with low unemployment actually have a healthy economy where middle-class jobs are abundant. Instead, in many nations, employment is either being created by temporary government public works or these nations have large amounts of subsistence farming, which is counted as employment.
Interestingly, low unemployment is not necessarily driven by large economies, the Gallup data show. Three of the nine countries with the lowest unemployment fall within the bottom half of countries with the lowest gross domestic product per capita out of 226 countries outlined by the CIA World Factbook. A few other countries, including Thailand and Montenegro, have similarly low GDP per capita, although not quite in the bottom half. This illustrates that low-earning countries also can have low rates of unemployment.
Because of the difficulties in comparing unemployment rates, the Gallup study also reported the percentage of the population employed full-time by an employer — a measure believed to more accurately reflect the employment situation of each country. In an interview with 24/7 Wall St., Dr. Dennis J. Jacobe, Gallup’s chief economist, explained that this method helps take into account those who are working on their own and making just enough to get by. “We’ve decided to focus on employed full-time for an employer,” Jacobe said. “Our conclusion out of all of this has been that it is difficult to make an across-country comparison because the rules are so different, and what is defined as a job is different in each country.”
Matthias Rumpf, Organisation for Economic Co-operation and Development’s chief media officer, echoed Dr. Jacobe’s sentiments. Rumpt told 24/7 Wall St. that using unemployment rates to compare developed and developing countries was problematic for these very reasons.
Many of the countries we examined, especially those in Asia, have unemployment rates less than 5%, but also have a relatively low percentage of their population working full-time for an employer. This includes countries with a great deal of subsistence farming. China, Thailand and Vietnam fall into this category. In China, between 30% and 39% of the population is working full-time. In Vietnam and Thailand, the range is between 20% and 29%. In contrast, most of the countries with the lowest unemployment rates have 50% or more of their population working full-time for an employer other than themselves.
There are also quite a few countries on this list that may have healthy economies in part, but their exceedingly low unemployment rates appear to be more a product of a government actively artificially suppressing rates through public programs. In Belarus, for example, everyone who registers for unemployment benefits must sign up for some public works project.
24/7 Wall St. reviewed the nine countries with unemployment rates less than 5% in 2011, according to the Gallup survey. For each of these countries, we added the Gallup figures for the percentages of the population that were employed full-time by an employer. We collected GDP and GDP per capita data from the CIA World Factbook. We also looked at long-term unemployment and GDP trends by country, provided by the World Bank.
These are the nine countries where unemployment does not exist.