At RealClearMarkets Jay Shambaugh reflects on the labor force participation rate, still low despite an unemployment rate below what it was a decade ago, just before the financial crisis of 2007-2008. Let’s jump to the conclusion of his post:
Yet, increasing employment is more than a purely material goal. Research has demonstrated that many people draw meaning from their work and establish their identity through their job, making increasing employment rates an even more important step to increasing welfare.
By “welfare” he means it in its economic and true sense: well-being. He doesn’t mean being on the dole.
In his article after noting that those who’ve remained unemployed are not a homogeneous group, he makes three suggestions:
- Making sure childcare policies are adequate, schedule flexibility available, and pathways to re-enter the workforce after taking time out as a caregiver would make it substantially easier to boost the employment rate.
- Protecting and further strengthening our nation’s healthcare system—including access to mental health care and drug treatment—would likely help many rejoin the workforce.
- Making investments in training programs, public employment, re-entry programs for felons, reforming licensing rules, among other policies may be needed to stem a long term decline in participation.
I strongly suspect that even if all three of those were implemented to the greatest degree practical the effect on the LFPR would be negligible. There are all sorts of factors that make a life without work more attractive and practical than it otherwise might be. The stronger and broader the safety net. The more menial and tedious the jobs on offer. Households in which there’s already one or more employed people. Safety net programs constructed to end as soon as you go back to work. Just not wanting to work. Habit.
This may be the new normal. Contrary to the urgings of some we shouldn’t just eliminate the network of state, local, and federal programs referred to as “the safety net”. The programs could and should be constructed better and more creatively. We could steer our economy away from maximizing the number of minimum wage jobs, our present policy and which the Germans refer to as “the American plan”, in favor of a system that produced more interesting and creative jobs. That would require a wholesale reappraisal which is unlikely to be forthcoming. Too many people are making too much money from our present system.
We could stop encouraging people to take on debt in pursuit of a higher education that will lead to jobs that don’t and will never exist. That, too, would require a massive reappraisal and reorientation. Anything that’s been a mantra for 25 years is bound to have momentum behind it.
My suspicion is that the emerging America will be one with a lot more hopelessness, opioid addiction, and violent crime than the world of bourgeois work and respectability that was expected when I was a kid. Let’s hope I’m wrong.
There is, in fact, a significant labor surplus in this country due to women entering the workforce, automation, legal and illegal immigration, free trade and off-shoring manufacturing. It might also be noted that the modern economy requires higher IQ workers, and groups like the Black underclass have no place in this economy. Consequently, all the social welfare programs are needed just to avoid mass penury.
The market for labor is certainly signalling a glut. The appropriate concern contrary to what Guarneri suggested in the comments thread of another post isn’t that wages have to rise enormously to attract workers but that they are decreasing or rising extremely slowly—no faster than the very low rate of inflation.
But my greater concern is that rather than as an economy we’re designing jobs so they can be performed by three unskilled workers at minimum wage rather than one more skilled worker being paid $20 an hour. Since I have seen this firsthand, it’s not just my imagination.
The technological advances allow less skilled, educated, and gifted people to do the jobs of the experts and craftsmen. With the printing press, bad penmanship, illiteracy, and untalented can produce more books than the scribes they replaced.
If software were still developed using assembly or C, the majority of programmers would be on the corner with their squeegee. At one time, maintaining a computer was not a trivial task. Does anybody remember autoexec.bat & config.sys or high memory & load order. Many tasks could only be performed using a DOS window.
Microsoft had a smartphone long before Steve Jobs created the iPhone, but it was like DOS & Win 3.11. If you knew how to configure it, it was great. Mobile Office, email synchronization, thumb drive capability, and ftp access were among the features, but few people want to root their cell phone and modify the operating system.
Regarding people not working, a lot of long term unemployed workers have adjusted. Our @Icepick was forced to change his lifestyle, and with his daughter, some of the previous options are no longer realistic. If a company decided he was worthy of a job, he would probably need a salary that would outweigh his present lifestyle.
In general, I have no doubt that work ethics have declined, but contrary to their claims, work ethic is a low priority for companies. Give me a person who arrives, dresses, and acts appropriately with a little education and a willingness to learn, and I can train them to do the rest. An added benefit is that I can train them my way.
When you indoctrinate a generation to believe that the losers are as good as the winners, you will probably create problems. I would bet that few of the people complaining have told their child they are a loser for second or last place.
One thing I think is in need of an update are federal work rules. Specifically what constitutes “full time” and “part time” work, definitions that trigger certain rights and benefits. The arbitrary definitions of “full time” and “part time” are anchors from industrial workforce rules and should be reformed.
I think allowing for more flexibility would be attractive to many employees and potential employers. I know several people, spouses of people with full-time jobs, who want to work, have skills, but can’t work full-time hours which are, in many cases 50-60 hours a week. Part-time jobs are almost all at or near the minimum wage. The only option is the “gig” economy where individuals are legally independent contractors.
I remember when you “wrote” programs for computers by wire-wrapping the backplane.
That’s right, TastyBits. Except in health care and education. Providers in both of those areas think that’s because of the unique qualities of their own fields. I believe that the weavers and goldsmiths thought the same thing and that the difference is that providers in health care and education have been successful in protecting themselves.
So far. I don’t believe that protection will last forever.
In my crowd, the people who have been voluntarily out of the workforce are all people who have worked in the past, and found that is didn’t really please them.
They weren’t getting a sense of identity or accomplishment, or feeling like they were doing something worthwhile, they were just doing stuff for money, and putting up with idiotic management decisions, politics and fake crisises. They consider work, and found non-work better, and were in a position where they could downgrade their consumerism and take an extended time off.
I don’t blame them. I want to work about 6-9 months a year, and get paid proportionately less. No one seems to want to employ me that way, so if the economy remains good, I will take 6 months or so after I leave my current job, which will likely happen sooner than later, since I really want an extended break.
Also, the people I know tend to be pot heads rather than opiate addicts, rarely commit violent crimes, and only feel hopeless when they are working.
Gustopher,
That was basically my situation. I think there would me more people willing to work if the work environment had more flexibility.
I’m lucky. I wasn’t planning to work, but I fell into a perfect gig that I can do from the road with flexible hours and decent pay (considering what it is).
Mike Rowe had a great show on about how booze built America. Subject, Erie canal, connecting lake Erie with the Atlantic for shipping.
Tools, dynamite, pick axes, shovels, loads of whiskey and ten thousand desperate Irish immigrants. Rations: room and one meal a day, plus a fifth of cheap whiskey metered out by the foreman, a shot at a time, all to keep them digging in the dirt for the required ten year dig.
I’ll bet today’s corporations are nostalgic.
The work I know is hard. No, not when you are young, then I thought it was fun. Now, I need that fifth, for the pain.
I started using a punch card machine.
Much of healthcare could be automated. There is no reason for a physician to ask a lot of questions. A healthcare computer does not forget to ask a question, and it has far more experience than any single human physician.
The VA is moving in that direction. As a diabetic, they check my eyes once a year, but for the last 12 years, a local VA technician took the images (digital) and sent them to Arkansas to be evaluated. There is no reason why the images could not be sent to India.
Before a primary care physician can schedule a specialist, they have to fill out forms and submit them for evaluation. The forms are computerized, and a wrong answer will stop the process. It might not seem like AI, but it is rules based. The patient is being pre-screened by the computer program.
There is very little that cannot be automated and outsourced – lawyers, stock traders, CEO’s, or PE investors. There is a computer program or an Indian ready to replace them. It is interesting how many outsourced people are former free-traders.
I have had at least one job since I was a kid (10 or so I guess). I don’t at all understand this work 6 months and takeoff for a few months. I will agree that an awful lot of full time jobs are really 50-60 hour jobs.
From my POV hiring people (we just passed 100 employees) flexibility has become more of a desire. Awful lot of married couples and they want flexible hours. People in their late 50s and early 60s are looking for part-time work.
Steve
Me too. I filed my first 1040 when I was 14.
That’s not what I said, Dave. You actually have historically been the one to say people could be attracted with sufficiently higher wages.
My point is that we find that raising wages, above the rate of inflation (or to make the point, rise absurdly high), usually does not succeed in attracting qualified candidates. Further, if wages rise sufficiently you will either disqualify producers from staying in business or customers will cease to buy. There are obviously other issues.
As I said, (and have posed numerous times) we might finally have the ultimate real world experiment. If we put tariffs on Chinese or Mexican goods, or restrict their citizens from participating in our labor market – a trade war be damned – we might actually sort out the tension between cheaper goods for consumers and better wages for workers, and the effect on the economy. Until then its all just speculation.