Perspectives on Unemployment
Percent of men, ages 25 to 54, who are not working and not looking for work versus year.
New York Times/Bureau of Labor Statistics
When a founding and respected member of the left wing media begins to echo those of us who are right of center, I have to sit up and take notice! The Editorial Board of the New York Times (of all people!) took official notice that a large fraction of the people who leave the work force every year are people who are in their prime years with ages between 25 and 54. Accompanying their editorial was the chart above of the percent of men, ages 25-54, who are not in the labor force. As I noted in the post U.S. Economy and Stock Markets, October 2016, people leaving the workforce for whatever reason will cause both the employment rate to rise and the unemployment rate to fall, even if no one entered the workforce. Of course, simultaneously the labor market participation rate, which is the size of the workforce divided by the U.S. adult population, would fall along with the workforce.
What the Left has been trying to sell us for a long time is the idea the increasing flow of people out of the workforce is due mostly to the baby-boom generation finally retiring. However as Robert Romano observed in a Forbes.com post, the other side of the argument has the better evidence.
On the other side are those such as senior fellow and director of Economics21 at the Manhattan Institute, Diana Furchtgott-Roth who, in a Jan. 14 piece for RealcCearMarkets.com noted that “since 2000 the labor force participation rates of workers 55 and over have been rising steadily, and the labor force participation rates of workers between 16 and 54 have been declining.”
Which is absolutely true. Since 2003, those 65 years and older have seen their labor force participation rate rise from 13.99 percent to 18.7 percent. Those aged 55-64 saw their rate rise from 62.44 percent to 64.36 percent, a recent Americans for Limited Government (ALG) study of Bureau data from 2003-2013 shows.
Meanwhile, participation by those aged 16-24 dropped from 61.56 percent in 2003 to 55.05 percent in 2013, and for those aged 25-54, it dropped from 82.98 percent to 82.01 percent.
Many of those who would be expected to retire are hanging onto their jobs, while many of those who would be expected to stay in the workforce are dropping out. Particularly worrisome is the 6.5 percent drop between 2003 and 2013 of the participation rate of the young in the age group 16-24.
Are Disabilities More Prevalent Than in the 1950s?
The fact that recent retirees are not the explanation for the drop in the labor market participation rate is not news for those of us on the political Right. However, the fact that such an exalted icon of the left-wing media as the New York Times would recognize it is news, at least for me. In addition, their explanation why so many in their prime years are exiting the working population is also fascinating. Quoting a working paper by a Princeton economist, Alan Krueger, the Times says the decline in the participation rate of those in their prime years is due primarily to increasing disabilities, particularly to disabilities with chronic pain requiring painkiller medication.
Taking another gander at the plot at the top of this essay, one would have to conclude painful disabilities are a lot more common today than they were back in the 1950s. Has medical science deteriorated so much in the last half century that disabilities are a more severe problem now? As you can tell from my last sentence, I am now becoming very suspicious.
Just to check out what the facts actually are, I did a Google search with the search string “fraud in disability claims“. I expected to find a great many links to posts from those on the Left claiming disability fraud is a fevered imagination of right-wing idiots; as well as a great many posts from those on the Right claiming that disability fraud is indeed a big problem. However, on the very first page of search results, I found only one post saying that the Right is full of baloney. This was a post from MediaMatters entitled Right-Wing Media Miss the Facts On Disability Fraud. More typical was a post on the National Public Radio website, not exactly considered a bastion of right-wing opinion. The very first paragraph stokes my suspicions.
In the past three decades, the number of Americans who are on disability has skyrocketed. The rise has come even as medical advances have allowed many more people to remain on the job, and new laws have banned workplace discrimination against the disabled. Every month, 14 million people now get a disability check from the government.
In fact, in the second paragraph the article notes the federal government expends more money every year on disability claimants than it does on food stamps and welfare combined. A little further along in the essay, an amusing yet enlightening anecdote is provided of a retired judge conversing with a man on disability, who nevertheless appeared healthy.
“Just out of curiosity, what is your disability?” the judge asked from the bench.
“I have high blood pressure,” the man said.
“So do I,” the judge said. “What else?”
“I have diabetes.”
“So do I.”
In fact I had high blood pressure and diabetes before my retirement, and it did not keep me from working. I would bet this is the case for a very large number of people. The essay concludes with the following paragraph.
As far as the federal government is concerned, you’re disabled if you have a medical condition that makes it impossible to work. In practice, it’s a judgment call made in doctors’ offices and courtrooms around the country. The health problems where there is most latitude for judgment — back pain, mental illness — are among the fastest growing causes of disability.
Similar posts can be found on the CBS News , NBC News, and ABC News websites, also not known as advocates of right-wing opinion. It would appear as people use up their unemployment benefits, they increasingly drop out of the labor market and turn to disability claims. Many of the “disabled” the New York Times worries about would appear to be part of the economically discouraged who stop participating in labor markets.
Other Tidbits From the Bureau of Labor Statistics
The New York times obtained the data for the plot at the top of this post from a unit of the U.S.Department of Labor called the Bureau of Labor Statistics (BLS), so I went to their website to see what else of interest I might find. There, immediately on their home page, I found the following little tidbits.
- Real average hourly earnings decreased 0.1 percent (annualized to 1.2 percent) from August to September.
- Job openings decreased to 5.4 million in August; hires and separations were little changed at 5.2 million and 5.0 million, respectively.
- Real average weekly earnings increased 0.2 percent over the month (of August) due to the decrease in real average hourly earnings combined with a 0.3 percent increase in the average work week. That is, people worked slightly longer at less pay for slightly higher earnings.
In other words, changes in labor markets were slight, but if continued they could be the harbingers of labor market deterioration suggested by the data in Labor Market Not Nearly As Good As Many Think.
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