The Great Shift: A New Era for the Job Market and Why We Must Act
The U.S. unemployment rate has steadily declined from its Great Recession high of 10 percent in October 2009 to 7.3 percent in August 2013.
And, as the unemployment rate has fallen, something else has happened: the labor force participation rate (LFPR) has declined rapidly. LFPR is the percentage of adults who are in the workforce, and today it’s at the lowest level since the 1970s. In August, the LFPR reached a 35 year low – 63.2 percent.
This has become the new normal for the economy. Following the Great Recession, we’ve entered into a Great Shift. The shift is marked by the declining LFPR caused by retiring Boomers, Millennials who have given up looking for work and an over-stretched taxpayer-funded social safety net.
Certainly, some of the decline in LFPR was entirely predictable as the baby boom became a retirement boom. Boomers are 26.4 percent of the population and about 38 percent of the workforce, and the first of them turned 60 in 2006.
Economic modeling suggests, however, that about half of the decline in LFPR during and after the Great Recession could not have been predicted.
It turns out millions of Americans decided the job market was so unforgiving that it was better just to give up looking for work. There are as many as 6.6 million Americans who are out of the labor force but still want a job.
These aren’t boomers; they include many of the next generation, the Millennials. A report from the Federal Reserve Bank of San Francisco noted, “The recent withdrawal of prime-age workers from the labor market is unprecedented.”
It’s not so surprising then that 36 percent of young adults ages 18-31 were living in their parents’ homes in 2012, the largest percentage in 40 years, according to the Pew Research Center.
Fewer workers plus more Americans relying on tax-funded benefits does not equal a robust economy.
Each of these trends can be at least partially blamed on the much discussed “skills gap.” The Bureau of Labor Statistics reported 3.9 million job openings this summer, despite the high unemployment rate. Employers often report that available workers just don’t have the skills necessary for available jobs. A survey of Express Employment Professionals offices found that 78 percent said it was “somewhat difficult” or “very difficult” to recruit and fill positions, especially in the fields of manufacturing, accounting, sales and IT.
Certainly there’s a need for greater training and education. These solutions will take time and are not easy investments for unemployed workers or indebted governments. But businesses can and must act. The implications of inaction are dire: a labor shortage, an uncompetitive economy, and a safety net stretched to the breaking point.
Small and large companies must find ways to train inexperienced employees to fill open positions, which will also help cultivate the human capital necessary for increased labor participation.
In some cases, this means making current employees aware of existing programs. The Society for Human Resource Management has reported that at least 90 percent of organizations offer professional development opportunities to their employees, but only half take advantage of them.
While we may take comfort in the occasional economic good news, we can’t rest easy until the trend of declining LFPR is reversed. America survived the Great Recession, but now we face another test: the Great Shift.
Bob Funk is CEO and Chairman of the Board of Express Employment Professionals.
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