In our opinion: Lagging labor participation rate continues to show troubling signs about economic health
Unemployment, at least according to the official jobs report released earlier this month, stands at 6.3 percent nationally — the lowest level in almost six years and far below the 10 percent or so at the height of the recession.
Unfortunately, that number is largely irrelevant. It ignores a growing segment of the population that is so discouraged it has stopped looking for work. True economic recovery must involve helping even these folks regain employment. Ignoring them doesn’t make anything better.
The unemployment rate is defined by those in the labor force who are actively seeking a job but are unable to find one. When people give up looking and decide to leave the workforce, they no longer count in unemployment statistics. In fact, their absence actually causes the visible jobless rate to fall, creating the illusion that more people are finding work.
They’re not. New jobs are indeed being created, but the alarming number of people who have given up the search create a drag on economic recovery, even as they represent wasted human capital.
When President Obama assumed office in January 2009, the labor participation rate (the percentage of people 16 and older with jobs) stood at 67.3 percent. It has been dropping steadily ever since and now stands at only 62.8 percent. That 4.5 percent difference accounts for more than 3 million people who don’t have a job and are not looking for one. And while Utah’s labor participation rate is much higher than the national average, the state trend of a shrinking workforce is almost identical to the national one.
If the people who have given up looking for work since Obama took office were still counted, the unemployment rate would be 11.1 percent, according to a recent Washington Post blog. Add in those who have given up looking since the day George W. Bush was inaugurated, and the rate would be 13.1 percent.
Just because those people aren’t looking for work doesn’t mean they aren’t suffering, or that they wouldn’t welcome a chance for a job.
Not all of the shrinking labor force can be attributed to a bad economy. Demographic trends drive some of it. The population is aging and baby boomers are retiring. But age isn’t the only factor; some younger workers are leaving the workforce, too. Much of this is due to changes in a global economy that pays meager wages for low-skilled workers. When good jobs are scarce, public benefits become more attractive to those who can’t find jobs that pay them enough to live.
Deliberate effort, from public and private sources, is needed to fix this problem. Educational opportunities and mentoring programs could make it attractive for employers to hire people who have mistakenly decided they are unemployable. This might include tax incentives to businesses, as well as the use of unemployment insurance funds for training and workforce development.
While there is no quick fix, the first step in finding a solution to this problem is to recognize that it exists, even in Utah. Current methods for calculating unemployment encourage people to forget the long-term unemployed. They still matter, and their welfare matters to the economy at-large.
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