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Friday, November 7, 2014

The Sky Is Falling! The Labor Force Participation Rate Declines

The cry of the Republicans continues:

"Labor force participation rate LOWEST in 40 years...which means people GAVE UP LOOKING FOR WORK! Government-reported unemployment rate only counts those who are actively looking (and not finding). Once your employment benefits run out, whether you've found a job OR NOT, the government no longer considers you unemployed, and voila! A drop in the unemployment rate! :)"

Chicken little pic found HERE 

Um, Robert.. No.

"Robert" wrote the above comment to this article at Addicting Info.  You'll have to dig a bit in the comments to find it, but I did answer him.. and then somebody else.

I'm continually stunned by the spin surrounding the declining labor force participation rate.  Yes, it has gone down, but most peole who comment on it don't even know what it is, much less have any real understanding of why it has decreased.

So here's the whole scoop, for those who really want to know what is going on in this country.

1. The allegation:  "Government-reported unemployment rate only counts those who are actively looking (and not finding)"

The Truth:
 No developed country ANYWHERE counts people as unemployed unless they are actively looking for work. It's actually an international standard. And how can people find work unless they are out there looking for work?

. The allegation: 
 "Once your employment benefits run out, whether you've found a job OR NOT, the government no longer considers you unemployed, and voila! A drop in the unemployment rate!"

The Truth:  
Government-reported unemployment has nothing to do with who is or who is not collecting benefits. I don't know why so many people think that is true. Right now we have about 2 million people collecting benefits and over 9 million who are unemployed. Do the math.

You are considered unemployed as long as you are looking for work, a week, a month, a year, two years... You can be unemployed for a decade as long as you make ONE effort during the month to find work.

3. The allegation:  "Labor force participation rate LOWEST in 40 years...which means people GAVE UP LOOKING FOR WORK!"

The Truth:  
Yes, the labor force participation rate is lower now than it has been for awhile.  But the labor force participation rate  is the result of many things, mostly demographic and economic trends.  A lower labor force participation rate is not necessarily a bad thing.

Basically it is good that people can retire, stay in school, stay home and take care of kids or aging parents. Historically, the lower the labor force participation rate, the higher the inflation-adjusted weekly salary. That's why the righties go nuts about the labor force participation rate; they want everybody out there begging for jobs; they hate the idea that people can actually retire at some point and enjoy their lives.. or something.

In any event, the number of people who have given up their search for work in discouragement, despair, and misery is declining rapidly, and that number is greatly eclipsed by the number of people entering the labor force - and by the number of people who were previously employed who are leaving the labor force (think retirement.) I've got graphs and sources here if you care to look:

4. The allegation:  "Leaving the workforce to retire is NOT covered in the GOVERNMENT statistics. They cover people of working age, able to work but not looking for work. Last figures that the Govt put out that I could find said 63.7% participate. Which means 36.3% DON'T, but could. Not "are retiring" Here's the GOVERNMENT statistics, as You really shouldn't quote your own blog as a source. Keep it simple. Figures are down in the last few sentences. 

You are absolutely and totally wrong, but I don't expect that you will bother to check things out and see that you are wrong, even though I'm including definitions from the BLS site."

The Truth:    Curtis wrote the above.  Now, let's get the basics of the labor force and its definitions correct: 

First of all, the definition of "labor force participation rate" is the PERCENTAGE of people in the civilian non-institutional population 16+ who are either LOOKING FOR WORK or EMPLOYED. The article that Curtis quoted does tell us who is in the labor force is, but it doesn't tell us what the labor force participation rate is.

Here's the definition of labor force and labor force participation rate straight from the BLS:

"Labor force: The labor force is the sum of employed and unemployed persons. The labor force participation rate is the labor force as a percent of the civilian noninstitutional population." 

That definition can be found HERE.

Now, the definition of "civilian non-institutional population 16+":

There is no top age limit to who is considered to be in the "civilian non-institutional populaiton 16+." People who are retired ARE in the civilian non-institutional population 16+ as long as they aren't living in a nursing home. Peole who are disabled and living at home ARE in the civilian non-institutional population 16+. People who are in high school and college ARE in the civilian non-institutional population 16+ as long as they are over 16. 

People in institutions, nursing homes, prisons or people who are ACTIVE military are NOT considered to be part of the civilian non-institutional population 16+. 

From the BLS site: "Persons 16 years of age and older residing in the 50 states and the District of Columbia, who are not inmates of institutions (e.g., penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces."

Exactly what I wrote above. The specific source is 

5. The allegation:  "Which means 36.3% DON'T (work), but could. Not "are retiring" 

The Truth:  
After reading the above definitions, it should be clear that the 36.3% who DON'T work and who aren't looking for work include people who are in high school and college (but over 16), people who are retired, people who are disabled but living at home, and people who are home with their kids, along with a small number of people who are discouraged.

My editorial opinion:

I explain all of this in easy-to-understand language over and over and over again (here) at my blog.. But it's still too complicated for some people. And, the people at the rightie blogs and people at venues like Fox really WANT people to believe that there is something horrible about all of these people who are in school, at home with kids, or retired. They want you to feel that YOU are working and all of these lazy people are not working. You are being lied to and deceived, Curtis. Sigh. I'm sorry; I really am.. I'm sorry for all of us that so many people, like you, have been deceived and lied to. 

For the record:  My blog uses data provided by the BLS. I don't make anything up and I usually include the specific source; that is, the specific table that the BLS has provided.  I have been analyzing and writing about BLS and DOL data for about 6 years now and may even know that data and what it represents better than almost anybody outside of the BLS. In addition, I worked for several years as a consultant for one of the state agencies that supplies data to the BLS and I worked on the 2010 Census.  

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