Wednesday, February 12, 2014

Prime Age Workers: Bulk of Discouraged Workers

The vast majority of "discouraged workers" are unemployed working-age "prime-age" (25 to 55 years old) Americans that are not counted as part of the labor force, and many have been incrementally dropped from the labor force in droves over the past 5 years.

Counting all retired workers, spouses of retired workers, young widows(ers) with children, disabled widows(ers), parents of deceased workers, disabled workers and spouses of disabled workers (who are in payment status for Social Security benefits), there is a total of 49.7 million of the working-age civilian nonintuitional population (if no one also held a job) that could be potentially counted as "not in the labor force"—out of a total of 92.5 million (Here the Bureau of Labor Statistics reports 91.4 million).

This would be a difference of 41.7 million (who are not institutionalized or drawing an unemployment benefit) that are not in the labor force, implying that most are unemployed—which is close to other estimates: 48 million who are out of work and want a full-time job.

Now one can attempt to reconcile those numbers with these numbers I did in an earlier post where it shows that, according to the Bureau of Labor Statistics, in 2012 there were 124.4 million total households in the U.S. --- and 27.6 million of those (22.1%) had no "earners" at all.

According to White House reports, 23.9 million were long-term unemployed and received extended unemployment benefits since 2008—and just over the past year alone, 20 million people received reemployment services. Most of these people were "prime age" unemployed workers, not "older workers".

And the vast majority currently not in the labor (excluding Social Security beneficiaries) where "non-starters" (high school graduates), and those that were not rehired since the mass layoffs during the Great Recession.

Many older workers, because the couldn't find work, left the work force to take an early Social Security retirement at the age 62—and a few went on disability as well. But all told, they represented far fewer people than those who never entered the work force to begin with (because there has been a lack of jobs).

From David Wessel at Brookings, in an article titled America Isn’t Working:
More than one in six men between 25 and 54 years old—the prime working years—aren’t working. That’s 10.4 million men ... Some of them are looking for jobs. Two-thirds say they aren’t ... About 2 million of these prime-age men are on Social Security Disability Insurance.
Note: Wessel is saying that, counting other discouraged workers who are no longer counted as part of the labor force, there are more men in their prime years that are out of work than what the Bureau of Labor Statistics is reporting as the total who are unemployed in then current work force

Also note that Wessel says "2 million of these prime-age men are on Social Security Disability Insurance"—which is also true according to Social Security, as shown highlighted in blue in the chart below:

Source: SSA -- Number and average monthly benefit for disabled workers, by age and sex, as of December 2012 (More info here)
Total 8,826,591 $1,130.34 Men: 4,606,044 Women: 4,220,547
Age Number Avg. Mo. Benefit Number Avg. Mo. Benefit Number Avg. Mo. Benefit
< 20 467 433.59 272 442.36 195 421.36
20–24 46,127 579.33 27,280 592.09 18,847 560.87
25–29 175,631 722.39 100,152 740.83 75,479 697.92
30–34 304,073 829.71 161,117 850.70 142,956 806.05
35–39 404,457 908.78 202,861 943.38 201,596 873.96
40–44 629,700 974.45 316,371 1,028.90 313,329 919.47
45–49 967,164 1,029.48 493,181 1,104.68 473,983 951.22
50–54 1,521,074 1,102.60 781,189 1,210.16 739,885 989.04
55–59 2,045,962 1,190.49 1,063,399 1,336.18 982,563 1,032.81
60–65 2,731,936 1,274.28 1,460,222 1,459.10 1,271,714 1,062.07
SOURCE: Social Security Administration, Master Beneficiary Record, 100 percent data.
CONTACT: (410) 965-0090 or

Actual disabled workers in their prime years (25 to 55) for men was 2,054,871 in 2012 and was 23.3% of all disabled workers. There were another 2,523,621 older workers (55 to 65) on disability whose benefits will revert to regular retirement benefits when they reach retirement age.

At the end of 2013 there were a total 8,942,584 disabled workers of all ages—while there were 8,827,795 at the end of 2012—for a net gain of only 114,789 last year—so this obviously isn't a main factor contributing to the decline in the labor force—and neither were Baby Boomers, since this decline began in 2000 and the first Baby Boomer didn't retire (early) until 2008.

As was noted here, there have been a record number of older workers who have been retiring since the Great Recession, making the argument that one reason is because, older workers (55-65) who were laid off in 2008/09 were not rehired again, forcing a great many Boomers to take early retirements at age 62 in 2008/09—while many others went on food stamps after their unemployment benefits ended; while only several thousand workers have since received a disability award.

Most of those other older workers (under 62) who were laid-off were left "high-and-dry", and may have went on TANF, moved in with friends or relatives, became homeless (or committed suicide) because they would have had no source of income after their number of weeks of unemployment benefits had ended (had they even qualified).

The birth rates in the U.S. have declined, but of those who are still within the population, they are graduating from high school at a faster rate than birth rates or the number of jobs that have been created. So the ratio of jobs-to-population growth doesn't apply at this time—either until birth rates increase, or until the current number of young people are absorbed into the labor force.

The argument being made is, while retirees and those with disabilities have contributed to the rising decline in the labor force participation rate, they have only (thus far) only contributed proportionately so—both as a percent of the overall population base, and as a percent of the civilian noninstitutional labor force.

It has been a combination of 1)"non-starters" (high school graduates) 2) laid off prime-age workers, and 3) older laid off workers (55-65), who make up the bulk of the decline in the labor force—and not retirees and those on disability (So to say otherwise, might lead some to suspect that counter-claims might be nothing more than an attack on Social Security "entitlements". See the chart below:

_ Year
Boomers turn 62 2008 748,047 325,848 3,001,337
2009 1,239,768 361,910 3,039,015
2010 1,079,409 415,597 3,068,550
Boomers turn 65 2011 1,006,724 371,357 3,103,540
2012 1,120,242 251,728 3,100,510
2013 1,171,737 114,789 3,092,290

The Social Security Administration reports:
Disabled beneficiaries aged 18–64 in current-payment status accounted for over 4.6 percent of the population aged 18–64. The largest percentage of disabled-worker beneficiaries was aged 60–64. Then disability benefits convert to retirement benefits when the worker reaches full retirement age. (See the charts at the SSA website for more stats)
Wessel also says that in 2009, nearly 20% American men ages 25 to 54 didn’t have jobs. Even though the unemployment rate is falling, 17% of these men aren’t working. He goes on to say:
Partly due to globalization and technology, the wages of less-skilled, less-educated men have been falling. Simply put, that makes them less willing to get off the couch, particularly if finding a job demands running a gauntlet of on-line applications or requires a move or a long commute or surrendering government benefits. The surest way to put the most employable of these men back to work would be a stronger economy in which jobs were more plentiful and employers couldn’t be so picky about filling openings. Economists’ research suggests that higher wages, particularly for low-end jobs, would lure more men off the sidelines ... With jobs as scarce as they are today, the bulk of the evidence suggests unemployment benefits aren’t a major factor in depressing the number of men who have jobs. Harvard’s Lawrence Katz argues that collecting unemployment compensation helps individuals consider themselves as men who’ll go back to work someday, as opposed to being retired or permanently out of the job market.
Frances Coppola remarks on Wessel's post:
Male employment has been falling more-or-less steadily since the 1960s. One in six men are inactive, not because of the recent recession, but because of some kind of secular trend that we have not clearly identified. Wessel suggests that disability payments may be part of the problem. [But] the proportion of men with a disability who are working has fallen since 2008:

Frances Coppola goes on to say:
But it is hard to argue that the reason is over-generous disability benefits. It seems more likely that in a slack labor market, men with disabilities simply find it harder to find work ...Wessel argues that a bigger problem is that employers are not paying high enough wages to attract men, so they aren’t bothering to look for work. Therefore, he argues, the minimum wage should be raised and/or in-work benefits should be increased so that men’s incomes are high enough to make them want to work ... By all means, increase the minimum wage and raise Earned Income Tax Credit. Or better still, introduce a basic income ... I don’t think wage rates are the primary cause of declining male employment. The real issue is the changing nature of work. Western economies are moving from a production-dominated model to a services-dominated model, and employers in [low-wage] service industries often prefer to employ women.
Charts below for your information:

* An early post I did: 8 Million Jobs Short, 6 Million Missing Workers (I posted this just for the sake of argument, to show other numbers from the Economic Policy Institute...numbers I believe are far too conservative.)

1 comment:

  1. UPDATE from the New York Fed

    The Job-Finding Rate

    "The job-finding rate is still substantially below its pre-recession levels, suggesting that it is still difficult for the unemployed to find work ...both the vacancy-to-unemployment ratio and matching efficiency declined during the Great Recession and have not recovered since ... the most important factor in the low job-finding rate is the persistently low level of vacancies per unemployed."