October 29, 2012

RETURN TO NORMALCY:

More People Opt Not to Work Anymore (BEN CASSELMAN, 10/29/12, WSJ)

As of September, the share of the adult population that either had a job or was trying to find one--a measure known as the labor-force participation rate--stood at 63.6%, close to a 30-year low. Other measures of job-market health, such as hiring and the unemployment rate, have shown slow but relatively steady improvement over the past two years. But labor force participation keeps falling.

Public attention on the shrinking labor force has tended to focus on unemployed workers who abandon their job searches. But such people make up a relatively small share of the millions of individuals who have left the labor force in recent years. Most of the dropouts are retirees, students or stay-at-home parents--people who wouldn't want a job even if one were available.

Indeed, sweeping demographic and societal changes were driving down the participation rate long before the recession took hold. Young people are starting work later as more of them go to college. The flood of women into the workforce, which drove the participation rate up sharply in the second half of the 20th century, has slowed. Most significantly, the population is aging. Americans over age 55 are half as likely to work as those between age 25 and 54--and the over-55 population is growing at more than three times the rate of the adult population as a whole.

Economists at the Federal Reserve Bank of Chicago earlier this year estimated that such long-run trends account for close to half of the decline in the participation rate since 1999, and some experts put the figure even higher. Barclays Capital argues that fully two-thirds of the drop is due to the aging workforce and other so-called structural factors.

"We think the evidence is quite clear that the single biggest reason the labor force participation rate has been falling has been the retirement of the baby boomers," says Barclays chief U.S. economist Dean Maki. "This would have happened whether the economy was strong or weak."

The other big reason that the number is trending back towards its historical norm is that when women and blacks were first integrated into the work force they were simply added to it by white male bosses who did not make the corresponding move of reducing white male employment, so we ended up with artificially bloated job rolls.  It was only a matter of time before : (1) those older white men moved on and new management stopped protecting those jobs; and (2) economic forces put pressure on management to do away with the excess labor.

Posted by at October 29, 2012 5:11 AM
  

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