If you talk to someone in Governor Snyder’s administration, you might get the impression that Michigan’s workforce had a lot to celebrate on Labor Day. Last month, unemployment fell to an astounding 3.7%. Frankly, I never thought during the Great Recession that I would ever live to see our state’s jobless rate fall below four percent again.
Four percent, economists used to tell us, was the classic definition of full employment. We are now better than that. But a new report from the Michigan League for Public Policy reveals some profoundly disturbing news about our labor force.
It is a whole lot older, grayer, and smaller. Plus a huge number of people who were working or looking for jobs a generation ago are now doing neither.
Though our population is essentially the same as when the century began, 326,000 Michigan workers have somehow disappeared from the labor force.
“Michigan is steadily losing workers, and our workforce is getting older,” said Gilda Jacobs, the Public Policy League’s president. She added that neither of these things bodes well for our economic future.
The unemployment rate can be misleading. A four percent unemployment rate simply means four percent of those who are working or looking for work don’t have a job.
But if you get so discouraged that you stop looking or never start, you are not counted as officially unemployed. It’s clear that this accounts for a lot of what’s been happening. In the year 2000, almost 69% of the eligible population was participating in the labor force.
That declined dramatically, however, when what we call the Great Recession arrived in 2008 and 2009. Within months, the labor force participation rate fell to 60%.
That’s happened before, but this time it has pretty much stayed there, rising to only 61.4% as of last year. Meanwhile, a record high percentage of those still working are over 55. Throughout the 1980s and 90s, about 10 to 12 percent of the work force was that age. But suddenly that has almost doubled, to 22%.
If you thought that restaurant server or grocery bagger was older than you remembered, it is because they are. There are a number of reasons for that. In some cases, they may just like what they do. But in other cases, it may be that older workers are still working because fewer and fewer have adequate pensions. Social Security also rewards those who wait to collect it.
What seems baffling, however, is the steep decline in the percentage of adults in their twenties who are looking for work. The Michigan League for Public Policy guesses this might be due to stagnant wages and competition from low-skilled workers who are older or younger.
Whatever the reason, a state where a considerable number of young people are neither in school nor even looking for work is not going to be a state on the cutting edge of prosperity.
The Michigan League offered a number of sensible ideas to help those preparing to enter the labor force, including support services for young single moms. But it seems pretty clear they don’t have a fix on either the precise causes of the incredible shrinking labor force, or the solution.
I think we need to devote considerable resources to finding out why.
Jack Lessenberry is Michigan Radio’s senior political analyst. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.