A couple weeks ago, the economics bloggysphere had worked itself into high dudgeon over extreme claims about what the ‘real’ unemployment rate might be. But this is very disturbing–and it’s real (boldface mine):

The most recent report puts the white unemployment rate at around 4.5 percent. The black unemployment rate? About 8.8 percent.

But the economic picture for black Americans is far worse than those statistics indicate. The unemployment rate only measures people who are both living at home and actively looking for a job.

The hitch: A lot of black men aren’t living at home and can’t look for jobs — because they’re behind bars.

Though there are nearly 1.6 million Americans in state or federal prison, their absence is not accounted for in the figures that politicians and policymakers use to make decisions. As a result, we operate under a distorted picture of the nation’s economic health.

There’s no simple way to estimate the impact of mass incarceration on the jobs market. But here’s a simple thought experiment. Imagine how the white and black unemployment rates would change if all the people in prison were added to the unemployment rolls.

According to a Wonkblog analysis of government statistics, about 1.6 percent of prime-age white men (25 to 54 years old) are institutionalized. If all those 590,000 people were recognized as unemployed, the unemployment rate for prime-age white men would increase from about 5 percent to 6.4 percent.

For prime-age black men, though, the unemployment rate would jump from 11 percent to 19 percent. That’s because a far higher fraction of black men — 7.7 percent, or 580,000 people — are institutionalized.

In terms of wages, this has actually kept wages from falling:

Derek Neal, an economist at The University of Chicago, and Armin Rick, an economist at Cornell, argue that mass incarceration has masked a lot of economic pain and a lot of inequality.

The official statistics are “very deceptive when the trends in the fraction incarcerated are changing,” Neal says. “You can actually measure an increasing employment rate or a falling unemployment rate simply because, over this period, we’ve put more of the people who have trouble finding jobs in prison.”

…Neal and Rick find that in 2010, black men earned about 75 cents for every dollar white men out of prison made. But if all the men in prison also had jobs, there would be a lot more inequality — black men would only be earning about 65 cents on the dollar. Had all these people been on the job market instead of in prison, they would have competed with other workers for jobs, driving wages down…

Western and Pettit argue that the wages for low-skilled black workers in the 1990s rose in part because incarceration reduced the number of people competing for work. As incarceration rates slowly start to fall, there will be pressure on the economy to absorb some of the most hard-to-employ people in society. “Somehow we’re going to have to figure out how to address the really severe employment problems of low-skill men,” Western says.

Too bad there’s no one who has a history of calling for a massive infrastructure rebuilding program running for elected office.

Seems that might “address the really severe employment problems of low-skill men.”

Thankfully, neither of the Democrats are deficit hawks…wait a minute…