Sunday, March 9, 2014

Retirees and the Declining Labor Force

The unemployment rate stood at 5.0 percent when the Great Recession started in December 2007. According to Labor Secretary Perez this week: "For four years uninterrupted now — 48 consecutive months — private-sector employment has grown, to the tune of 8.7 million new jobs."

According to the Economic Policy Institute, we should be DEAD EVEN today, because over the last four years the labor market has gained back all of the 8.7 million jobs we lost during the Great Recession.

Now if only the population had not grown, and we had no new high school and college graduates attempting to enter the labor force, or we didn't have any new questworkers on H-1B visas, or we didn't have any more jobs offshored overseas—then maybe every single person who was laid off during the Great Recession would have been rehired again — and we would be back to 5% unemployment if job creation had kept up with population growth—and the labor force participation rate (LFPR) would have more or less remained the same.

But it hasn't, and for some reason, Boomers have been blamed as the cause, rather than a lack of jobs.

Since 2010, it may have been mostly retirees contributing to the most of the decline in the labor force participation rate --- but that's only because they had the option of collecting a Social Security benefit after exhausting all their unemployment benefits without ever being rehired again. Many (maybe most), since losing values in their 401ks and homes, may have preferred working much longer.

The decline in the labor force participation rate may have previously already included all the unemployed prime-age "discouraged workers" — those who have already been previously accounted for since the Great Recession began—and after all the mass layoffs had occurred, as most were never being rehired again — either because they were older workers (but not old enough to draw a retirement pay or pension) and/or because they were unemployed for longer than 6 months. Meaning, if they did NOT retire (because they didn't have the means to), they were already accounted for in one way or another in the labor force participation rate before 2010:

  1. First, when they their lost jobs, and were counted as "unemployed" but still in the labor force.
  2. Then as "discouraged" workers or as long-term unemployed workers (possibly up to one year) and still considered marginally attached to the labor force.
  3. Until when, they were later considered either a "missing worker", and/or no longer counted at all as part of the labor force at all (until they "dropped out", according to statisticians.)

This post at Economists View titled Upward Grind in Labor Markets Continues says of the latest jobs report:

Looks like the weather was less about hiring, and more about people not being able to get to their jobs ... More structural unemployment combined with evidence that the fall in labor force participation is increasingly attributable to retirement suggests less labor market slack.

Where that post then links to a BusinessWeek article titled The Fed's Obsession Over Labor Force Participation Could Be A Big Mistake, which says:

Consider the findings of a recent study by Shigeru Fujita, a senior economist at the Federal Reserve Bank of Philadelphia, titled On the Causes of Declines in the Labor Force Participation Rate. Fujita demonstrates that "discouraged workers" only made up about a quarter of those leaving the labor force between 2007 and 2011, while "the decline in the participation rate since the first quarter of 2012 is entirely accounted for by increases in nonparticipation due to retirement."

That study says the nonparticipation rate accelerated during and after the Great Recession, and also says:

The increase in nonparticipation due to retirement has occurred only after around 2010 [and] almost all of the decline (80 percent) in the participation rate since the first quarter of 2012 is accounted for by the increase in nonparticipation due to retirement. This implies that the decline in the unemployment rate since 2012 is not due to more discouraged workers dropping out of the labor force.

This correlates with my post titled Record Number of Boomers Left the Labor Force, where I say:

Since the recession ended in June of 2009, before NET new jobs were being created (and before the unemployment rate had peaked in October of that year), older workers were left out of the midst of any new hiring, and many (if they were old enough) were forced to apply for early Social Security benefits at age 62—which was in 2008 when the first Boomers turned 62—up until 2010, when their unemployment benefits were exhausted (up to 99 weeks), but before they turned 65 for full Social Security benefits in 2011.

Which also correlates to this most recent post titled Winter Polar Vortex Didn't Freeze The Unemployment Report, which says:

Those not in the labor force has increased over two million in the past year. These are not all baby boomers and people entering into retirement as we showed in this analysis of labor participation by age.

What we have seen is a never ending growing segment of the population that is considered neither employed or unemployed (i.e. not in the labor force) increasing above the trend line of those who would be naturally dropping out, such as the retired and those in school. Not in the labor force figures do include retirees and the size of the population greater than age 65 has grown.

This article states: "The so-called participation rate in the job market has been generally falling in recent years. Demographics explain a goodly chunk of the trend, since growing numbers of baby boomers are reaching retirement age."

But like the article also states: "The long-term unemployed aren't just people age 50 and older, however. Rather they're a cross section of the labor force."

So let's look at some numbers for the number of births, immigration, guestworker visas, high school grads, Social Security beneficiaries and deaths in the U.S. for 2012 (last available data for all categories):

Centers for Disease Control and Prevention
3,952,841 births in 2012
Deaths 2,468,435 (2010)
Deaths 2,512,873 (2011)

Center for Immigration Studies
700,000 people were issued temporary visas to work in the United States in 2012

National Center of Education Statistics
3,100,510 high school grads in 2012
3,203,000 high school "completers" in 2012
Percentage of high school students age 16 and over who were employed --- 8.9 (0.55)
All Data:
More Here:

Social Security Administration
1,120,242 net increase Social Security retirees and those on disability.

Homeland Security: Immigration Statistics
(Need info for number of 2012 immigrants)

It is not just Baby Boomers driving down the labor force participation rate, it is also prime-age adults and high school grads that can't find work. It's really a lack of jobs being created (because of offshoring), and not because a bunch of old people retiring.

*** DISCLAIMER: Per a notable economist ---The number of annual high school and college graduates, which vastly out-number new Social Security retirees and those awarded on a disability claim every year, have very little bearing on the number of jobs needed to keep up with population growth. Although, others disagree


  1. Dennis Lockhart, President and Chief Executive Officer Federal Reserve Bank of Atlanta, says that to get close to full employment would involve substantial absorption of the shadow labor force—those who are not working but also not counted in the standard unemployment rate.

    Lots more here:

  2. When you consistently work more than 40 hours a week, ask yourself these questions:

    - Why are you doing it?
    - Are you afraid of losing your job?
    - Do you own the company?
    - Are you a major stock holder?
    - Does your company do this because it refuses to hire more employees?
    - Does your employer have to cut back to stay in business?
    - Is your company looking out for the stock holders or you?
    - Are you insecure or is it the company you work for insecure?
    - Do you think sacrificing your health and personal life will win points with your boss?
    - How many hours a week do you think you need to work to live?
    - What is your life worth when you only have time to work?
    - Do you really believe your boss cares about you?

    The fact of the matter is you and your job will be gone some day. Sooner or later your job will be overseas unless that job requires a body to be here. That would be an $8/hr trade or service employee of some sort. Owners of companies sell and retire rich, but not you. They merge with other companies and thousands lose their jobs. Since the late nineties after the "dot com" crash, the white collar employee has been doomed. Now it is the first paid billet to go. It used to be the American factory worker, but he/she has been doomed for decades. They are unemployed while their jobs are being done by workers overseas. Those foreign workers don't pay taxes here and are working for the price of a cheeseburger 12 to 18 hours day. We lose our jobs to slave labor because we refuse to work like dogs. The next time you are asked to do someone's job that got laid off or quit then remember this... you are working for your own death... not life, health and happiness. Those longer hours guarantee you absolutely nothing.