Lost workers

Date posted: June 10, 2013

The increase in folks not participating in the labor force, meaning they aren’t working and are not looking for work, continues to be an issue. Some say this trend is making the unemployment rate look much better than it really is. Why are fewer people in the job market? N.C. State University economist Mike Walden responds.

“This is the debate about the reduction in the so-called labor force participation rate. It is an issue.

Number one, you can clearly see it in the data, and it is a big source in the debate among economists. Some people say that, ‘Hey, the unemployment rate would be a lot higher if we were counting these folks who aren’t in the labor market as part of the unemployed.’ So, one appropriate question is, Why, why has the labor force participation rate gone down?

There are several factors here. One clearly is that people are staying in school longer. For example, it used to be if a large number of kids who came out of high school, they’d immediately go into the work force. Now, most of them are going on to college. So, that’s a factor.

Another big factor is the growth of retirees; the percentage of people over age 65 is growing. Many of those are now retiring. So, that’s bringing down the labor force participation rate. We’ve also had an increase in people who are officially categorized as disabled, receiving disability payments from social security.

So those three factors do account for a lot of this reduction in labor force participation, but there are folks out there who in the new economy simply don’t have the right skills to match up with jobs. Those, I think, are the folks that we really need to worry about. Those are the folks I think that policy needs to focus on.”

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