Exploiting the Labor Participation Rate

One of my nieces is 16 years old and attends a local high school in Utah.  Her world is centered on books and boys and her free time revolves around extracurricular activities.  I have a nephew who is enrolled in college and enjoys any time away from his studies bonding with friends and creating memories that will last a lifetime. My wife stays at home and raises our four daughters, a luxury our family is able to afford. My mother spends time quilting and cooking or playing with her grandchildren. My father-in-law is retired and can be found catching up on the news and traveling. What is interesting about all these individuals is their impact on the labor participation rate.

What is the labor participation rate? Basically it’s the number of people working divided by those eligible to work (anyone over 16). Retired seniors, stay-at-home parents, the disabled, high school and college students all impact the labor participation rate. The participation rate does not make exceptions for those out of the workforce nor does it measure those actively searching. It only reflects those working vs. those who are not. Currently we have 90 million Americans not employed according to the labor participation calculation, but this statistic is misleading.

Economists Labor Rate Forecast

Economists have been straightforward about the declining labor participation rate. Most of the decline over the past decade is due to demographics, specifically baby boomers reaching retirement age and deciding to exit the workforce. In fact, of the 90 million Americans out of the workforce, 40 million are retired seniors. Economist have also pointed out that with an improving economy more parents have chosen to stay at home. The participation rate among youth is declining as well – driven by increased attendance at colleges and universities instead of entering the workforce directly following high school.

Republicans have pounced on the labor participation rate data and misconstrue the results as a political talking point. The assumption that 90 million Americans are all searching for employment would equate to a labor situation comparable to The Great Depression. Yet this is the only way to negatively spin the record job growth our country has witnessed over the past several years. 90 million unhappy Americans, who cannot find work, who are frustrated with the labor market, are sitting at home twiddling their thumbs, is a message conservatives can believe in.

At a recent Republican debate, FOX Business Moderator Sandra Smith pushed the participation rate propaganda stating, “More than 90 million Americans are unemployed, or they are not in the workforce altogether. The number of people now willing, able, and wanting to go to work is at a level that has fallen to a level we have not been since the 1970's.” Almost every GOP candidate has fabricated the 90 million statistics in speeches or town halls. Ted Cruz recently claimed “I think we're facing enormous challenges in this country. The Obama economy has led to the lowest labor force participation since 1978. 92 million Americans aren't working.” Donald Trump echoed this point, "We have 93 million people out of work. They look for jobs, they give up, and all of a sudden, statistically, they're considered employed." Each of these statements prey on the ignorance of the audience, and the speaker is neither challenged nor corrected.

Once you remove the retired senior population, students, stay at home parents, disabled, and other statistical exceptions not looking for employment, the unemployment rate drops to 5%; the lowest level in almost a decade. With 2.7 million jobs added in 2015 under President Obama’s leadership and 2016 appearing equally promising, it is not surprising that misguiding statistics like the participation rate is on the lips of every Republican pundit and candidate. Of course, this is to be expected. Speaking accurately about our nation’s labor situation is bad for conservative politics and would give support to this Administration's current policies.

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