Sutton's Law states that when diagnosing, one should first consider the obvious. The law is named after the bank robber Willie Sutton, who reputedly replied to a reporter's inquiry as to why he robbed banks by saying, "Because that's where the money is."
Maybe it's the "brain drain" --- all the best and brightest students are going to work in the financial industry --- and that is part of the problem that we are currently having with our economy; we don't have enough "smart" people running our government, while the bankers are doing great. Even different people at different branches of the Federal Reserve can't seem to agree on why the labor force participation rate has been so low and declining.
I would suggest they use Sutton's Law: "Because we lack jobs."
In September of 2009, after the "official" recession had ended in June of that year, there were 160,000 job applications from all across the nation to fill 12,000 new positions at MGM's new mega casino-hotel resort CityCenter in Las Vegas, Nevada. That equates to 13,333 job applicants for every one job opening.
At that time, as a laid-off 53-year-old casino bartender (and a 20 year resident of Las Vegas with 20 years of experience), I was passed over for being hired at the new casino 3 times—once as a bartender, then as a barback and lastly as a busboy. I had already been long-term unemployed for one year by this time, but my previous employer had agreed to say I was still working for them while I was searching for work (so that there would be no gaps in my job resume). So at this time, I wasn't being rejected simply because I was unemployed (or "long-term" unemployed.) So why wasn't I ever rehired again?
The unemployment rate in Las Vegas didn't even peak until one year later after CityCenter had first opened, when it hit 15% in October 2010. At this time I was one of 145,400 unemployed workers in Las Vegas because the MGM didn't hire me. So if not for lack of experience, a bad credit rating, a criminal history, or any lapses in my resume, why was I passed over for other people from Maine to Oregon—and for those with far less experience or no experience at all in the hotel/casino industry? Could age have anything to do with it?
You bet it did. The Revel Hotel and Casino on the Boardwalk in Atlantic City, New Jersey did the same thing—skirting the age discrimination law by imposing "term limits" on its frontline employees. From the Las Vegas Review-Journal:
"Many of its dealers, beverage servers and other customer service workers will be young, attractive and sexy. And a policy the casino is implementing will probably keep it that way. Applicants are being told they will have jobs only for as few as four years at a time, after which they will have to re-apply. That means competing with younger, fresher faces."
So in 2009, at 53 years old, I guess I wasn't "young, attractive and sexy" enough to be hired—like an old and obsolete widget.
Middle-aged workers like myself (over 50), who were unfortunate enough to lose their jobs during the Great Recession (due to lack of in-house seniority, or for wherever other reason), have had the most difficulty finding work again (especially if they were unemployed longer than 6 months). The Baby Boomers that didn't get laid off were planning to work longer to recoup their losses in 401ks and home equity values.
There has been much said about the great decline in the "labor force participation rate", and it appears that none of the supposed "experts" seem to agree on why that is—with many (including the Fed, our central bank) pontificating that much of this has to do with Baby Boomers leaving the work force to retire. This is total BS.
The simple fact is, there are not enough jobs for everyone in 2014—just like it was in 2009, when 160,000 job seekers had applied for 12,000 jobs at MGM's CenterCity. But many economists are reporting that most of the decline in the number of people in the labor force is because people like myself are retiring, and not that most people are only "dropping out" of the labor force because they can't find jobs.
- Recently in Florida 5,000 people stood in line to fill out job applications for 1,500 full and part-time jobs at a new mall.
- Recently in Washington DC there had been over 23,000 job applicants for 600 jobs at two new Walmart stores.
- A job fair in Chicago last year had 3,000 show up for 60 jobs.
- In West Sacramento about 500 people stood in line to apply for 50 job openings at a new In-N-Out Burger restaurant.
- More than 10,000 people submitted résumés in about two hours at Southwest Airlines for 750 flight attendants. American Airlines also had 20,000 applicants for 1,500 openings.
- In Graniteville, South Carolina Bridgestone tires was recently bombarded with almost 4,000 applications for 200 jobs.
- In Northeast Albuquerque thousands of people applied for 200 new jobs at Target and only had a one in 35 chance in getting a job.
- In Louisville, Kentucky (over a period of just three days in 2009) 10,000 people applied for 90 jobs at a General Electric factory paying only $28,000 a year (This was 2 years before the first Baby Boomer turned 65 in 2011.)
- Also in Louisville, Kentucky (in 2011) around 6,000 people applied for 1,800 jobs at a Ford factory.
- Last year in National Harbor, Maryland Tanger Outlets (the mall) had ten thousand people applying for 900 low-paying positions.
- In Brooklyn, New York last October more than 5,000 job hunters competed for 1,200 positions at another mall, Kings Plaza.
- Last July in Moline, Illinois the Hobby Lobby store had over 1,000 applications for 80 jobs.
Does anyone sense a pattern here? Like maybe, lots of people are looking for jobs --- ANY type of jobs --- and that maybe the decline in the labor force has more to do with this, rather than middle-aged people like myself shuffling off into early retirement?
Why is there so much disinformation on the subject of a declining "labor force participation rate" because of retiring Baby Boomers? Is it just political? Or is it because the Fed, a few economists and the Wall Street market-makers don't want the public to know just how dismal the news really is—and that it would sour consumer confidence? Are they worried that we would demand more action by the Fed and the government?
Let me be perfectly clear: I did NOT retire, nor I did voluntarily "leave" or "drop out" of the labor force. I was forced out in 2008— and since then, employers had refused to rehire me. That's because employers can now pick and choose younger workers over myself in an over-saturated job market. I lost all my savings during a two year job search, and now (at 58), I can't collect a reduced Social Security retirement for another 4 more years. People don't voluntarily "drop out" of the labor force— they need money to live on!
From a study by Shigeru Fujita at the Philly Fed (dated November 19, 2013):
"As of the first half of 2013, roughly 5 percent to 6 percent of individuals in the working-age population are out of the labor force because of disability, 16 percent to 17 percent are out of the labor force because of retirement, and the rest have left the labor force for other reasons....There is no question that more workers dropped out of the labor force due to discouragement during and after the Great Recession and that there are more discouraged workers now than before the recession. These facts clearly reflect the continued weakness of the U.S. labor market."
The study noted that the nonparticipation in the labor force (due to disability) raised the overall nonparticipation rate by 1.4 percent (between the beginning of 2000 and the end of 2011); but he also adds, "In the last two years or so, however, it has been flat, thus making no contribution to the overall decline in the participation rate."
The very first Boomer turned 62 in 2008 and took an early Social Security retirement in 2008. Notice (in the graph below) the big plunge in the employment-to-population ratio at this time when 8.7 millions jobs were lost during the Great Recession. The first Baby Boomer didn't retire at age 65 until 2011—but both the labor force participation rate AND the employment-to-population ratio have BOTH been in a steady decline since the year 2000. You can double check the Fed's charts below with data from the Bureau of Labor Statistics' website for the employment-to-population ratio and the labor force participation rate, both which had already peaked in April of 2000.
Now also notice (in the graph below) how after the job losses during the recession, it drags along the bottom—indicating that all the new job growth since the recession has barely kept up with population growth (new people entering the labor market).
As an aside: Offshoring has taken a toll. According to the Bureau of Labor Statistics, the data reveals that in 2001 the U.S. had 398,887 manufacturers. By then end of 2012 the U.S. only had 334,800—a loss of 64,087 manufacturers during those 12 years alone. And this doesn't just represent jobs directly lost due to offshoring, but also their accompanying "multiplier effect" as well. (Read the latest assessment of NAFTA and this 16-page report on the proposed TPP trade agreement about previous broken promises.)
During this same period of time (from 2000 to 2014) the U.S. had 37.6 million more high school graduates, but only 14 million additional retirees and disabled people on Social Security. So very little of the 92 million Americans not in the labor force has to do with retiring Baby Boomers (or other people like myself) that are voluntarily "dropping out" of the labor force. To say otherwise is total BS.
New enrollees in college (and don't they also usually work?) and retiring Baby Boomers (who also many times work) only make up a small portion of the decline in the labor force. It's mostly "discouraged workers" who can't find a job—and this includes older workers who were laid off during and since the Great Recession, as well as younger workers who have been attempting to first enter the work force (*See all the data and charts at the Economic Populist showing this).
But yet, recently from the Atlanta Fed:
"Many people have left the labor force because they are discouraged from applying (U.S. Bureau of Labor Statistics data indicate that a little under 1 million people fall into this category). But the primary drivers appear to be an increase in the number of people who are either retired, disabled/ill, or in school."
But still, also from the Atlanta Fed (by a different author) they contradict themselves:
"Some of the decline in labor force participation since 2009 is due to the baby boomers retiring, but even among prime-age workers—those aged 25 to 54—the participation rate is down significant...This suggests that other factors, such as low prospects of finding a job, are playing a role."
If you follow the link to the Bureau of Labor Statistics, it also shows 6 million not counted in the labor force "who want a job". In other words, the first article I mention by the Atlanta Fed is full of BS. The decline in the labor force is primarily because of too many "non-starters" attempting to enter the labor force (probably because of the offshoring of jobs and guestworker visas, and not because Americans lack STEM skills). And also because of us "old people" who were laid off but aren't being rehired again. And that's because, now there are simply not enough jobs for everybody in the growing working-age population.
So while I offer myself as "Exhibit A" in this false "debate" as to why the labor force participation has been in decline, I have been in regular contact with many others over these past 6 years (in my age group) who are in the same exact circumstances as myself. Many are college grads and some have years of IT skills with STEM educations. There have been congressional hearings on older workers and studies have been done. So ignore the BS—we are not retiring—it's because we can't find work.
Common sense. And that's all Willie Sutton and I have to say on the matter.