April 02, 2016
The Washington Post repeated one of the major myths about the recovery in an article in the March employment report when it told readers:
“In the long shadow of the recession, the share of the population in the work force sunk to 62.4 percent in September, the lowest level in nearly 40 years. The government calculates that number by counting the people who have a job or are actively looking for one. That means students, retirees and stay-at-home parents are generally not considered part of the labor force.
“Indeed, the shrinking of America’s workforce is largely due to broader demographic shifts. The labor force peaked at 67.3 percent of the popuation in 2000 and has been drifting downward ever since. The biggest driver has been the retirement of Baby Boomers, who are turning 65 at the rate of 10,000 each day. Young people are also staying in school longer and less likely to work during their studies.”
Actually, the main reason the labor force participation rate (LFPR) has fallen has been a drop in the LFPR among prime age workers (ages 25–54). This peaked in 2000 at 82.8 percent in early 2000. In September of 2015 it bottomed out at 79.2 percent, 3.6 percentage points below its 2000 peak. The drop in LFPR in the recession and weak recovery has been primarily a story of workers in their prime working years leaving the labor force, not baby boomers retiring or young people staying in school longer.
The piece also cites reports by Wells Fargo and the Kansas City Federal Reserve Bank indicating that those with more education are doing much better in finding work in the recovery. This is not clear from the data. In the last year the employment rate of people with college degrees has not changed, while it fell by 0.6 percentage points for those with some college.
By contrast, the employment rate for people with just high school degrees fell by just 0.1 percentage point. It rose by 1.7 percentage points for workers without high school degrees. This gap is even more striking since the retiring baby boomers are less-educated on average than younger workers, so their retirement should be having a disproportionate effect in reducing the employment rate of less-educated workers.
Note: Link corrected.
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