Saturday, September 8, 2012

Share of Men in Active Labor Force at All Time Low

Some revealing statistics about the composition of the labor force and its participation rate over time is worth taking a few minutes time to review. Artificially low reported unemployment rates are the result of declining labor participation rates. In addition, the fewer people who engage in productive activity in a society, the less prosperous that society will be. Less input equals less output, in other words. 

Thus, in a sense, the "best" and certainly the fastest way to reduce unemployment is to have people drop out of the work force and quit looking for work. Today reported statistics about our U.S. employment issues aren't telling the complete story about how bad things are. Not even close.

And as a result, when President Obama says hire more public sector workers as the solution, what he's really saying is borrow more money from the Chinese and go deeper in debt as a nation. Then let future generations worry about how to pay if off. If all we want are temporary jobs to help politically during an election campaign, let's just hire a bunch of people to dig holes and another bunch to fill them up.

But if we want to hire more police, fire fighters and teachers on a permanent basis, we first have to have a highly engaged and productive private sector that's creating the wealth and private sector jobs to be able to pay the taxes which will pay for those permanent public sector jobs.

The private sector pays for the public sector. It's that simple.


Yesterday's unemployment rate was reported at 8.3% and the broader U-6 rate at 14.7%. Add back what used to be a normal labor participation rate, and it's getting closer to 20%.

In order to redistribute income from workers to non-workers, old and young alike, there first has to be income to redistribute. That requires people working and producing goods and services of value to others. Number of people working + time worked + pay for time worked + level of productivity (output for input) = nation's output or GDP. It's that simple.

Share of Men in Labor Force at All-Time Low tells the story in charts accompanied by a brief summary of each:

"Friday’s jobs report for August was chock full of all sorts of bad news. Among the most distressing: The share of men actively participating in the labor force — that is, working or looking for work — was at an all-time low.
Source: Bureau of Labor StatisticsSource: Bureau of Labor Statistics
Just 69.8 percent of all men over age 16 were in the labor force in August, compared to a long-term average of 78.3 percent since the Labor Department began tracking these data in 1948. The share has been falling pretty steadily over the last six decades but has declined sharply in the last few years.

Some of this could be attributed to the fact that the country has been aging, so more people are of retirement age. But the participation rate has also fallen dramatically for men of prime working age, 25-54:
Source: Bureau of Labor StatisticsSource: Bureau of Labor Statistics
There are many competing (or in some cases complementary) arguments for why the share of men in the labor force has been declining.

For example, a lot of traditionally male jobs, in industries like manufacturing and construction, have disappeared, and many of the men who were displaced gave up looking for work when they couldn’t find similar jobs.

The federal disability rolls have also skyrocketed, and when people go on disability, they rarely return to the labor force:
Additionally, the share of women in the labor force rose steadily from the 1940s to the late 1990s. There is some debate about what effect this had on men’s employment. Most economists I’ve spoken with have argued that women were not “taking” men’s jobs, especially since for a long time “women’s work” was distinctly different from “men’s work” and the total employment pie was growing. At the very least, though, the entrance of more women into the job market theoretically made it less essential for married men to work, even if women tend to be in much lower-paying jobs."

 Summing Up 

Conditions in the U.S. labor market are undergoing long term change, especially when factoring in the impact of less construction and manufacturing employment.

In addition, there's the global competitiveness piece of the story, along with the greater educational levels being attained by women over men.

Add in the aging of the population and the greatly increasing number of those going on the federal disability rolls, and we have a real problem.

How much is cyclical and how much is structural is the biggest question of all, of course.

Unfortunately, that's not easily answerable and won't be for many years to come.

Thanks. Bob.

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