Improving labor force participation

In spite all of the doom and gloom that seems to dominate the news cycle, the American economy seems to be doing alright. Earlier this month, there was a lot of good news that came out of the Census Report:

Between 2014 and 2015, U.S. median income rose from $53,718 to $56,516. 3.5 million people rose out of poverty in the United States and the poverty rate continued to drop from it’s high in 2010. The percentage of people without health insurance dropped to 9.1 percent, a historic low. This isn’t to say there isn’t room for improvement. Median income, adjusted for inflation, is still below its peak of around $57,000 in 1999. Health insurance premiums continue to rise quickly compared to the prices of other goods and services.

One perpetual sticking point within the good news of the economic recovery and topic of frequent debate and analysis is labor force participation essentially, how many people are either employed or unemployed and actively seeking work. The percentage of people not participating in the labor force is at 62.8 percent, which is near historic lows.

To put this in perspective, the rate rose steadily throughout the 20th century as more and more women entered the workforce, and it was at an all time high of 67.3 percent at the beginning of 2000. Looking at just the labor force participation can be deceiving. It doesn’t count people who choose not to work for perfectly normal reasons, like being a full-time parent, retiring or going to school. For this reason, many think it’s important to look at the labor force of participation of people in between the ages of 25 and 54, which strips out most students and retiring baby boomers.

When looking at these numbers, it’s clear that are historically large proportions of working age Americans are out of the labor force. The American workforce appears to still be ailing by this measurement, even as unemployment drops.

This phenomenon is even more exacerbated for workers who only have a high school education or less. There are many proposed solutions to getting more Americans back into the workforce, many depending on how the person views the problem. There are several of these ideas that I think have merit and would be politically feasible.                  

Investment

One of these ideas that is constantly referenced is investing in public infrastructure.

While normally I think the focus of public policy should be to accomplish a specific aim – in this case, to repair and construct roads, bridges and other infrastructure – this sort of federal spending would have the added effect of employing hundreds of thousands of Americans. A 2011 report from the White House’s Council of Economic Advisers estimated that every $1 billion invested in infrastructure would support 13,000 jobs.

A report recently released by the American Society of Civil Engineers estimated that American infrastructure needs would be underfunded by $1.44 trillion by 2025 and filling this gap would provide 2.5 million jobs directly and indirectly. While there is room for debate about the extent and impact of increased infrastructure investment, few would deny it would benefit the country’s economy.

The same reasoning can be applied to private construction projects. If private companies are able to grow and invest in projects, it will increase the demand for workers. A key part of facilitating this is insuring American businesses are able to function in a proper and certain legal and regulatory environment.                                   

Criminal Justice Reform

Another area of policy that would aid the American workforce is criminal justice reform, both at the federal and local levels. According to a report from the Prison Policy Initiative, there are approximately 2.3 million incarcerated Americans, more than any other country on the planet. While these people are not counted in the labor force when they are in prison, it has serious implications for their career prospects after they leave. Working to reduce incarceration rates for nonviolent criminals and investing in programs that help former inmates live a normal life and find work following their time in prison may not be the easiest ideas to sell politically, but it would reduce the likelihood that former inmates would end up back in prison or out of the work force.                                     

Social Insurance

A 2014 report from the CEA noted that between the 1967 to 2014, the number of prime working age males on Social Security disability insurance rose from 1 to 3 percent. While social insurance programs can not be blamed for the majority of the drop in the labor force participation, reforming SSDI and similar programs could help facilitate more recipients to rejoin the workforce.

For example, there could be improvements to train program recipients to work in different fields in which they are mentally and physically capable of working in. Additionally, payments could be structured to better reward people who have to work part time or take a lower paying job after an injury rather than not work at all.

In this smattering of suggestions of how to improve labor force participation, I think it’s important to remember that there are people behind all the numbers. Working to improve the country’s economy isn’t simply about boosting Gross Domestic Output or the amount of people working, it’s about making sure people can provide for themselves and their families and have the opportunity to live a fulfilling life.

Sean Cleary is the copy editor for The Dakota Student. He can be reached at [email protected]