Quo Vadis–Whither Goest the "Margins of our Labor Force"???

Dr. Alan Krueger

Dr. Alan Krueger

Since the Great Recession things haven’t been the same. There is much debate and considerable concern as to what may, or may not, be happening to our workforce. How can economic and workforce developers ignore critical changes in our labor force? The labor force is what we do for a living. Popular economic development strategies including attraction and retention, cluster development, economic gardening and innovation-knowledge-based economic development depend to a considerable degree upon the labor force for success.  So, let’s focus on workforce issues–specifically–what the heck is going on with our contemporary labor force!

Let’s start with understanding unemployment rates, structural unemployment, rates of inflation, interest rates, and wage stagnation and how they are related. Recent concern has focused on how these factors affect the Federal Reserve and the timing of an inevitable rise in interest rates. Our perspective is not concerned with interest rates but is alarmed by the widespread fear that structural unemployment may be the number one problem of the American economy. A recent article has caused quite a stir and its overlap with our concerns prompts this review. That article, Alan B. Krueger, Judd Cramer and David Cho, “Are the Long-Term Unemployed on the Margins of the Labor Market“, Brookings Papers on Economic Activity, Spring 2014 Conference will be reviewed from the prism of how its findings inform us concerning recent developments with our workforce.

Who is Alan Krueger–from 2011 to August 2013 he was President Obama’s White House Chair of the Council of Economic Advisors and currently he is a Professor of Economics and Public Policy at Princeton, Research Associate of the National Bureau of Economic Research, Founding Director of Princeton Survey Research Center, holds degrees from Cornell and Harvard, and previously he served as Chief Economist of U.S. Department of Labor (Clinton Administration), Assistant Secretary of Commerce in Obama administration. He is ranked in the fifty highest ranked economists in the world (IDEAS/RePEc), and author of several books.

Background: hopefully helpful in bushwacking our way through economist jargon-definitional jungle?

I will try to avoid jargon and speak conventionally, mostly because it will irritate economists who resent anything other than an algorithm. To be helpful at the bottom of this review I have provided definitions of the “labor force”, “unemployed”, the civilian non-institutional population” and the “labor force participation rate”.

First, some background to better understand the unemployment rate and how it sheds light on the issue of structural unemployment and labor force composition. Total unemployment (on which the unemployment rate is constructed)  includes three categories of unemployed individuals: frictional, cyclical and structural (the unemployment rate does not include children, disabled, institutionalized, or retired). The first two types (frictional and cyclical) of unemployment are “natural or normal”. Most economists agree that at any point, in any year, normal unemployment ranges from four to six per cent. Our present unemployment rate is around 6.1% at time of writing (fallen noticeably since 2010, 10+%). This suggests that we are have finally attained “natural” levels.

The Federal Reserve’s original unemployment target was 6.5%; once there, the Federal Reserve believed it could start the process of raising interest rates. In March 2014 the Federal Reserve, however, set aside its unemployment target and instead focused on attaining a 2% inflation rate target. The overall economy, they believed, was too soft at the time and it was judged that the inflation rate was a better indicator of the economy’s return to health than the unemployment rate. Why? Among other factors, it was not clear to them what the unemployment rate was really saying. Their concern was if unemployment was normal, then the threat of wage inflation was very real. If wage inflation were real, then the Federal Reserve had better start raising interest rates–wage inflation can be disastrous to the overall economy if not managed tightly. The Federal Reserve was concerned that the unemployment rate could not be interpreted using pre-Great Recession methodology.  Specifically, was unemployment rate’s traditional link with inflation still valid?

That was the principal issue Krueger, Cramer and Cho were trying to address in their article. In addressing that issue, however, they uncovered findings which overlapped with structural unemployment. Krueger et al raised the possibility that the traditional definition and interpretation of structural unemployment might benefit from more thought. Why? Because the unemployment rate included only those folk who said they were looking for a job. Krueger’s research indicated that increasing numbers were leaving the workforce, not being counted in the unemployment rate, and that many of the those who were being counted as presently in the labor force were in process of leaving the labor force.

US_Unemployment_1890-2009

Implicitly, this review asks the question if there is a page-turning increase in the number of potential workers who (are)/have left the conventionally defined labor force? A major finding by Krueger et al. is that most of those who are currently defined as structurally unemployed (and therefore in the labor force) are, in fact, likely to be in process of leaving it. Is there a new group of structurally unemployed who for unknown reasons are not interested in being in the workforce? Who are these structurally unemployed?

In the past, economists tended to define/explain (and largely restrict) the structural unemployed as those who “lack the skills” to allow them to effectively compete for a job, or who possess skills that are no longer in demand. In the old paradigm most structurally unemployed were unemployed individuals who worked in an industry or sector which was in transition or fading into insignificance, and was shedding workers or were new entrants to the labor force who were not prepared to compete for jobs. These structurally unemployed needed basic skills and/or to be retrained with new skills and repositioned into a growing occupation or industry sector. Most WIA  (Workforce Investment Act) programs are structured to deal within this paradigm. Essentially, Krueger et al., challenged the  paradigm–and in so doing they indirectly suggested that a “new style” structurally unemployed might be uninterested in working at all. Coming from President Obama’s Chair of the White House Council of Economic Advisors, this concern had to be taken seriously. Prestigious economists such as Larry Summers, Robert Samuelson, and Tyler Cowen have incorporated Krueger’s findings into their analysis. If people are dropping out of the workforce for reasons other than the lack of suitable skills, no amount of skills training or economic stimulus is likely to have a significant effect on economic growth and if so, an economic developer, especially a workforce developer must also take notice.

The June 2014 Jobs Report (BLS) and Other Relevant Data Points

To provide a recent context we have isolated some data points which follow from the June 2014 BLS Unemployment/Jobs Report. We have also supplemented with other data points, particularly relying upon Robert Samuelson’s June 12, 2014 article, “the Jobs Mystery” in Real Clear Politics. At the beginning of this summer the jobs situation was:

  • an unemployment rate of 6.3%–from a previous high of 10%. This totaled 9.8 million people.
  • plus another 7 million who say (1) they want a job but (2) are not looking for one–hence are not counted in the labor force numbers (they are included in the U-5) classification.
  • there are 7.3 million part-time workers counted as employed who want longer hours. In June 2014 alone more than 1 million were added to bring the total to 28 million part time workers of which an estimated 7.5 million want longer hours; there were only 4.4 million involuntary part timers in 2007.
  • full time jobs plunged by 500,000 in June 2014, but part time increased by 800,000 to over 28 million;  Only 48% of adults in the labor force are working full time in 2014!
  • average weekly earnings, however, have increased at the rate of inflation (about 2%) which suggests the Federal wage inflation target has been reached.
  • BUT, since late 2007, the “not in the labor force” (and not counted in the unemployment numbers) has increased by 13 million, and if only half were counted as being in the labor force, it would raise unemployment rate t0 9.7%
  • the percentage of those in the labor force who are unemployed for six months or more is nearly 35% (May 2014)–the pre-Great Recession peak was 26%. We are at levels never seen before. In 2010 the share was 45%.
  • while we have added 8.8 million new jobs since 2007, the U.S. population has grown by over 17 million-we have just now (August) reached 2007 employment levels. How many/who are missing and left out of counts?
  • labor rate participation in the labor force has fallen to 62.8% from 66% in 2008. Studies (Executive Office of the President, July 2014) suggest only half of the decline (at best) can be attributed to boomers retiring. Non-boomers in increased rates are not in the labor force–who? why?

Who are these part timers? Do they want full-time employment (in the past two-thirds did not)? What about those not in the labor force? Who are they? Why are such large numbers of working age people not entering into the world of work or want to work full time? What happens if they did? Would there be very serious inflation? Would there be wage deflation due to increased competition for employment? What about the long-term unemployed? The fear of the Federal Reserve is that potentially a large, even incremental movement into the labor force by these groups could trigger the wage-price-inflation spiral, skyrocket the unemployment rate–or both simultaneously. Bluntly, were not sure any longer what the unemployment rate is telling us? Enter Krueger et al. Krueger’s principal focus, the correlation of short term unemployment with inflation, is not ours; we will cull out his overlap with labor force participation and structural unemployment.

Summary of Krueger

U_S__Employment_Changes_-_Total_Non-Farm_1970_to_Present

Krueger observes that long-term unemployment (more than six months) “exceeds its previous peak reached in 1981-1982” while short-term rates are relatively similar to those of the last recession. From that observation, he asserts the main reason the overall unemployment rate has remained so high for so long is that long-term unemployed constitute a much higher than usual share of those who are currently unemployed. The short-term unemployed are finding jobs and for them the economy is working sufficiently well enough; rather, the problem we are facing is that too much of our total unemployed are long-term–and so we must better understand what their problem is? If the short-term unemployed can find employment, what is holding back those who fall into long-term unemployment?

His answer to that question, while enlightening, is a wee bit complicated. Krueger’s research forces him to conclude that the long-term unemployed are “on the margins of the labor force and therefore exert very little pressure on job market and the economy“. This is a back door way of saying that too many of the long-term unemployed are not really looking for serious employment. Rather, they are well on the road to leaving the workforce altogether.  Krueger accordingly has pinpointed the problem as to why the unemployment rate is currently so high–it is the long-term unemployed. “For most of the four decades prior to the Great Recession, the share of unemployed in the U.S. who were out of work for more than half a year oscillated between 10 and  20 percent during recoveries and recessions” (p. 20). In May 2014 long-term unemployed were 35%–down from 45% in 2010–but still two or three times higher than what it should be five years out from the 2009 collapse. [The previous peak (26% in 1981) had declined to about 10% within three years–we are now five years out]. It would appear Krueger is on to something; the long-term unemployed are clearly setting the pace for the overall unemployment rate.

Coming from the former Chair of the Obama White House Council of Economic Advisors, this is a surprising and pretty disturbing statement.

First, his answer to the Federal Reserve’s dilemma is that since the long-term are ultimately leaving the labor force (where they no longer compete for jobs), the current unemployment rate is very close to natural or normal levels of employment. If so, that means wage rates can quickly increase and the specter of inflation becomes more real and closer at hand. Wage inflation is possible/likely even though the overall unemployment rate remains high–driven as it is by the long-term unemployed which, if anything, is still increasing. This finding has caught the attention of economists (and the media) and it has triggered considerable debate as to whether the Federal Reserve will see evidence of wage inflation sooner than they expected–and will have to raise interest rates sooner as well. While this concern is not the focus of this review, it clearly is important to the reader. If Krueger is correct, interest rates will almost certainly be raised next year.

Krueger’s next question is more relevant to us: who are (demographically speaking) these long-term unemployed? To answer this one can either compare the long-term unemployed with the short-term unemployed or with the employed. We will present data for both. Comparing the long-term with the short-term unemployed, “fully 44% of the long-term unemployed were never married, while nearly 20% are either widowed, separated or divorced”–(what this has to do with long-term unemployment is not immediately clear); also a larger proportion of the long-term unemployed are over 50 and do not have a spouse (p. 22). High school dropouts amazingly are more likely to be short-term unemployed than long-term (which is not the way it is supposed to be); unemployed blacks are more likely to be long-term than short-term. “Differences across regions and between urban and rural areas are small“, however, and that is puzzling (p. 23).

What is most surprising, to me at least, is how the long-term and short-term are similar in occupation–only those unemployed with managerial and financial occupations are more likely to be long-term. Professional/technical, blue collar and sales and service are more likely to be short-term. By industry sector only leisure and hospitality evidence a noticeable difference and surprisingly, they are more likely to be short-term–they are finding jobs. Otherwise, industry sector does not differentiate between long and short term unemployed. Construction, for example, a likely candidate for long-term unemployed shows only a 1% difference between the two types (with short-term being higher). With a fragile housing market this would seem to be a prime candidate for long term unemployment–it’s not. Also, education, the be all and end all of knowledge-based economics, does not differentiate between long-term and short term unemployed . Indeed, those with a bachelor’s degree or higher are slightly (1%) more likely to be long-term unemployed. Said and done, marital status and age are the big differentiator between long and short-term unemployed.  Skills, or the lack of skills, does not differentiate long-term from short-term unemployed. The old skill-based structural unemployment paradigm is not helpful here.

Comparing long-term unemployed with those currently employed is very revealing. The 16-34 year olds are more likely to be long-term unemployed. Marital status (never married) is still a huge differentiator; married folk definitely are working. African-Americans are more long-term unemployed as are Hispanics to a lesser degree. Less than high school dropouts are twice more likely to be long-term and high school educated also are more likely to be long-term unemployed. In terms of industry sector, construction and leisure/hospitality are more long-term (with manufacturing, wholesale and retail trade, and professional/business services slightly more likely to be long-term). Occupation-wise, blue collar is significantly more likely to be long-term unemployed and sales/service and administrative only slightly more likely to be long-term. Nearly two-thirds (64%) of the long-term unemployed previously held either blue collar or sales/services jobs. The former is dominated by men and the latter divided fairly equally by gender. Nearly one-third of long-term unemployed are over fifty–but 40% are between 16-34. Those with high school education or less are 36% of the employed–but 54% of the long-term unemployed.

Comparing those currently employed with those currently long-term unemployed yields a more conventional picture of who is disadvantaged in the current labor market–but it also suggests that the long-term unemployed, when compared to the short-term unemployed are a different sub-group. There may be a sizeable segment of our population which floats in and out of employment and is not particularly focused on working? Given the chance, this last group might leave the workforce entirely. It would appear that there is something else, above and beyond demographics, that separates the short-term from long-term unemployed?

U_S__Full_Time_and_Part_Time_Workers

Krueger extended his research by using other data sets and surveys so that he could focus better on the “who” of long-term unemployed and determine how had they behaved over the last few years to see if the behavior of the long-term unemployed has changed since the Great Recession. First, he tackles whether unemployed are moving from dying industries/jobs into new and rising industries/jobs?  His findings suggest that those employed in 2012, who previously had been unemployed (short-term and long-term were broken out) each, almost to the person, obtained a new job in the same industry sector they had left. For example, short-term formerly blue collar unemployed  and long-term blue collar unemployed almost to a person obtained a new job in the identical blue collar sectors. The same could also be said for occupations as well. Krueger consequently asserts “that assisting unemployed workers to transition to expanding sectors of the economy, such as health care, professional  and business services, and management is a major challenge. Instead, unemployed workers who do return to work tend [overwhelmingly] to return to jobs in their previous sectors.”(p. 27) This is probably not surprising to those managing workforce programs. To cluster and innovation-knowledge economics advocates who chase fast-growing gazelles in high growth industries, the reality that industry/occupational transition of their community’s unemployed to employment in new sectors is difficult to the point of being unlikely has to be a caution.

Krueger also investigates how the long-term unemployed have behaved over the years. Using BLS monthly transmission rates from unemployment to employment by year  since 1994, Krueger makes the following observations: (1) the job-finding rate is lower for those with a longer duration of unemployment (the longer unemployed, the less likely to find a job); (2) the pattern evidenced following the Great Recession is more severe than previous recessions and job-finding rates post-Great Recession are “well-below their pre-Great Recession averages” (p. 30). The current recession is much worse in its consequences than preceding recessions; (3) while the job-finding rate has improved each year following the Great Recession, it has barely budged for those unemployed for twelve months or more. “In 2013 just 10% of those who had been unemployed for more than one year transitioned into employment in the average month“. When the long-tem unemployed do find a job, “the long-term unemployed are more likely to take low-paying, part-time jobs and temporary jobs“. (p. 30). Once an individual acquires long-term unemployment status, the likelihood of getting a job is very low and even if successful in finding a job, the quality of the job is likely to be poor.

What puzzles Krueger at this point is why when the Great Recession first hit the economy (2008-2009) the long-term unemployed did not exit the labor force then and there? Why did they stick around and try to find a job when things were at the very worst? Combine this with the present-day reality that the long-term unemployed are currently leaving the labor force at higher rates when the economy is obviously getting better/improving and their chance to find employment would seem to increase?  Why? Krueger thinks it is the extension of unemployment compensation (and other subsidies, p. 36) which typically broadens during the recession. If this is so, then long-term unemployed whose  core desire is to leave the labor force, only stay in the labor force in order to collect unemployment. When the recession is over (and subsidies wear off) the exit rate gradually has increased. The tapering off of subsidies and the initial increases in long-term unemployed exit rates began during 2013 and, only at that point did the long-term unemployed increased their leaving the labor force. For this reason Krueger expects the exit rate of long-term unemployed from the labor force to increase over the next several years as exit rates rise to their historical mean. This is not a flattering picture of the long-term unemployed.

To acquire a longer time perspective on this propensity of the long-term unemployed to exit the labor force, Krueger et al culled still additional data sources. From them He finds that there exists a demonstrated multi-decade propensity of the long-term unemployed to exit the labor force–pre-dating the Great Recession and rising particularly since the 1990’s. This is a major finding. Krueger is asserting that for more than two decades those who have been long-term unemployed have demonstrated a strong tendency to leave (exit) the labor force entirely. This problem is not the fault of the Great Recession–it just made the problem larger and more obvious.

Krueger then conducted a special analysis of long-term unemployed (using matched data from the CPS permitting analysis of transitions over 15 months). Since 10% of long-term unemployed find jobs each month, Krueger estimated that four of five (80%) long-term unemployed should find employment over a fifteen month period. Do they? The data says No. “Since the beginning of the Great Recession [only] 36 percent of those who were long-term unemployed in a given month were employed 15 months later (not 80%). Another 34 percent were not in the labor force [at all] and 30 percent were [still] unemployed 15 months later. Furthermore, of the 36 percent who were employed 15 months later, less than one-third had been employed full-time for four consecutive months. As a result, from 2008 to 2012, only 11 percent of those who were long-term unemployed in a given month returned to steady, full-time employment a year later“. (p. 37)  “Once the long-term unemployed leave the labor force for three straight months, they were likely to stay out of the labor force, with only 32 percent reentering“. (p.39) The long-term unemployed (at least two-thirds of them) are, in fact leaving the workforce.

Depressingly, Krueger has discovered that the post-Great Recession pattern is almost identical to that exhibited in the pre-Great Recession years (since the 1990’s). We simply are returning to the mean–a mean which “means” that long-term unemployed (which have been exiting the labor force for decades) are now increasing their exit at the very time the economy is getting better. Thus, for Krueger, the long-term unemployed are “on the margins of our labor force”–and long-term unemployment for two out of three long-term unemployed has become a mere half-way stop before dropping out of the world of work entirely . During the Great Recession these long-term unemployed stayed in the labor force so they could capture unemployment benefits and now they are returning to the normal behavior of long-term unemployed, leaving the labor force entirely. Currently the rate of exit out of the labor force is reverting to its historical level, the volume–i.e. number of long-term unemployed–has exploded during and after the Great Recession.

US_Employment_growth_vs_Population_Growth_by_decade

Krueger next asks the question “what reasons do the long-term unemployed state when they leave the labor force”. Krueger found that 73 percent of the long-term unemployed who left the labor force by month 16 indicated they do not want a job. This means the BLS U-5 figure is seriously understated; the two-thirds of those long-term unemployed who leave the labor force within a sixteen month period are not captured in the U-5. This finding potentially overlaps with the so-called labor participation rate decline of recent years (from 68% to 62%).

A second question asked by BLS of those who report they do not want a job is “What best describes your situation at this time”. “Since the Great Recession, those who had been long-term unemployed in the initial interview and then left the labor force by month 16 of (his) survey, and reported that they no longer wanted a job, indicated that they were currently ‘taking care of house or family’ (56 percent), engaged in ‘other’ unspecified activities (19 percent), and ‘in school’ (16 percent)… retirement (2 percent), disability (3 percent) and illness (1 percent). What can be made of these responses, Krueger does not comment–but when 3 out of 4 state they are not in the labor force and do not want a job because they are ‘taking care of house or family” (remember these folk are not married and are in fact mostly single) or won’t specify a reason at all, I, for one, am not impressed that we can attribute their action to any particular reason. It is certainly not clear whether they are frustrated, lack skills, are discouraged, or just plain don’t want to work.

Krueger’s final discussion point was to wonder whether the state unemployment rate had an effect on these findings. In other words, do states with low unemployment versus states with high unemployment affect the exit rates of the long-term unemployed? States with low unemployment rates should offer more opportunity for long-term unemployed to find jobs, and at least minimize discouragement so that they exit less. Researching the period from 1996-2013 Krueger observes that “We do not find evidence that the long-term unemployed are faring notably better in terms of transitioning to employment in the low-unemployment states than in the high-unemployment states.” (p.51) To Krueger this suggests that a return to prosperity will do little to alter the propensity of the long-term unemployed to exit the labor force. To me this opens up the possibility that a sizeable percentage of our potential workforce is, for a variety of reasons to be sure, not actively engaged in seeking full-time (or even part-time) participation in the world of work, but are in Krueger’s words, “on the margins of our labor force”. Say it another way, even in the “economically booming” areas and states, long-term unemployed are overwhelmingly leaving the workforce.

What Might an Economic Developer Make of All This?

Duration of US Unemployment: Federal Reserve Economic Data

Krueger’s final conclusion is a good starting point: “The portrait of the long-term unemployed … suggests that  … their diverse and varied set of characteristics implies that a broad array of policies will be needed to substantially lower the long-term unemployment rate and stem labor force withdrawal, as concentrating on any single occupation, industry, demographic group or region is unlikely to have a substantial impact…. Understanding the labor market and personal hurdles faced by the long-term unemployed should be a priority for future research ….” (p. 54) In other words, no magic bullets, non-economic and personality issues may be critical, occupational/industry targeting is not helpful because the problem is so widespread, and we really don’t understand why this is happening. That ‘s a good start (sarcasm). But Krueger is correct–there is amazingly little research on “those not in the labor force”–too embarrassing perhaps? If it is any consolation, much of the Developed World (Europe and Japan) seem to be confronting some version of a labor force problem. While considerable caution is required in comparing among different political/economic systems, or automatically importing a promising idea, we are not alone in trying to figure out what’s happening within the world or work.

In August (2014), Janet Yellen at the Jackson Hole Economic Policy Symposium, reflecting that the labor participation rate is the lowest in the thirty-six years of its measurement, wondered aloud if it was due to “cyclical factors” (which will work themselves out) or structural? Even the BLS is wondering if the future level of labor participation by younger cohorts will be sufficient to replace the retiring baby boomers? The labor force participation rate last peaked at 67.2 in March 2001 and in August, 2014 it was 62.8–the lowest ever. It has been reasonably estimated that between 8 to 10 million people (depending upon the year selected) represents the current difference between the two rates–a very sizeable number.

According to the BLS, 91 million Americans are not presently working (the gap between the civilian non-institutionalized population and total employed). BLS projects labor force participation to further decline, especially in the key 25-54 male cohort. Amazingly, the unemployment rate for this group is only 5.1%–a full percent below the overall rate–even though the labor participation rate of this cohort is at a sixty-six year low. In 1973 the labor participation rate of this 25-54 age males had fallen to 95% (from 98%); in 2014 it is 88%. Still, unemployment insurance claims are falling to lows not seen since 2007 but, an estimated 7.3 million 25-54 old males opt out of the labor force on any given month (Barron’s, Gene Epstein, Work’s for Squares, Sept 1, 2014). The prime-age labor participation rate of women is more complicated–but it too has been falling since 1999. So for the last fifteen years both prime age men and women have been working less and less each year. But this morning’s paper (Wall Street Journal, September 4, 2014), reports that job openings have never been higher–yet the BLS jobs report, the day after (September 5), reports the fewest number of new jobs created the previous month since early 2013. Why aren’t the job openings being filled despite the creation of lots of new jobs? The various statistics we have traditionally used are pointing in two different directions simultaneously. No wonder the Federal Reserve has backed away from using these numbers as a basis for its policy.

Anecdotally, as I review blogs and the economic development policy literature, the response to this confusion is to double-down on the usual STEM, innovation-knowledge economics and-go-to- (the right) college stuff. The customary babble about the skills mismatch, minimum wage magic bullets, and a ton of semi-partisan media blather about inequality still capture headlines. The newly approved (August) Workforce Improvement Program offers no answer–we’ve just lucky something got through Congress. In other words, there is no crisis out there–business as usual. Oh yea, a bunch of celebrities got their online nude pictures hacked? Well, frankly this Curmudgeon is worried and a bit depressed. He has taught at the community college level 2005 through 2014, and over that short time has seen a marked change in important student attitudes and work-related qualities–and he wonders? He is thankful that unlike many economic developers, his success and paycheck is not defined by job creation or reduction in unemployment in his community. This is yet another jobless recovery, and it seems there is some evidence that we may be forming a bi-modal society-economy out there–which means nothing but trouble for economic developers.

Unemployed in the Panic of 1837

Unemployed in the Panic of 1837

What’s going wrong? Assuming Krueger is more or less accurate who/what is to blame? Potentially, there are several explanations. The solution almost certainly requires some combination of the below-listed problems to be fixed:

  • long term bias by employers who allegedly believe that long-term unemployed suffer skill loss during unemployment.
  • long-term unemployed who are discouraged and quit–for example, only jobs they can get do not pay sufficiently.
  • the culture argument–some such as Charles Murray see the white working class as culturally imploding and becoming a sort of Roman mob.
  • Obamacare and Social Security Disability which reduce the number of jobs available to the long-term unemployed or which “enable” those not in labor force to obtain sufficient income to exit the labor force.
  • the “if the economy were stronger more opportunities for employment would exist” argument (workers trapped in sectors which have not yet expanded).
  • productivity/innovation “hollowing out” our workforce by destroying jobs for those who cannot meet skill/education demands of the innovation/knowledge-based employment.

Given our standard present-day way of dealing with national problems, I frankly expect more single-solution magic bullets, predictable ideological bull-do-do, and partisan games-playing to yield some advantage in one or another election. Toss in an ample dose of blame for whoever one doesn’t like and we have a policy process sure to find a solution in quick order. Seriously, we have concrete evidence that things are not working like they used to. If we don’t watch out we will have still more of “the poor will always be with us” than ever before.

Definition of “unemployed”–Who is counted as unemployed? (William Galston, Wall Street Journal and Table A-15, Bureau of Labor Statistics)

The labor force “is the number of Americans age 16 and over who are either working or unemployed’. To be unemployed you must be available for work and actively seeking it, unless you are waiting for your previous employer to recall you.  The unemployment rate is the unemployed (numerator) divided by the labor force (denominator). The official unemployment rate is sometimes referred to as the U-3.

The ‘civilian non-institutional population’ is the number of Americans age 16 and over who are not currently on active duty in the armed forces and who are not confined to institutions such as prisons, youth detention facilities, nursing homes or mental hospitals. The labor force participation rate is the labor force divided by the civilian non-institutional population. None of this is a “census”, that is an actual count of specific bodies–all are statistically estimated and derived from survey’s with estimated samples. If one is 16 or more, not in armed services or institutionalized, not working, and not looking for work– i.e. have exited from the labor force–and have not looked for work for more than twelve months, the best you can hope for is that you have been captured in the civilian non-institutional population. You would not be included in the labor force nor the unemployment rate.

There is a number (the U-5), which includes total unemployed, plus discouraged workers, plus “all others marginally attached to the labor force as a percent of civilian labor force plus all persons marginally attached to the labor force. A person who is “marginally attached to the labor force are those who currently are not working or looking for work, but indicate in a survey question that they want and are available for a job AND have actively looked for work in the past twelve months. A discouraged worker is a subset of the marginally attached and hence are included in that number. Discouraged workers have given a job market-related reason (it snowed or there are no jobs for my occupation in this town) for not currently looking for work.

U-6 includes part-time workers, marginally attached to labor force and total unemployed.

All of this comes in two sets of figures–not seasonally adjusted and seasonally adjusted. The media you read can cite all sorts of this stuff above and so you should be careful you are comparing apples to apples (seasonally adjusted, of course).

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