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Unemployed and overlooked: Labor force rate of participation down drastically

Since 2007, 4 million people have left the labor force, in many cases because they have given up looking for jobs. If these 'discouraged jobseekers' were counted in the jobless rate, August's numbers would have been 10.5 percent.

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"Maybe after the elections," Swan said of her next attempt to get work. "I know that I will be employed again. I don't know when, but I know it will happen."

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Americans of all ages are leaving the workforce, but the problem is most acute in the 20-24 age group, where the participation rate has plunged by 4.4 percentage points since December 2007.

Many Americans typically start working in their teens, taking part-time jobs after school and over summer vacations, a tradition that is supposed to instill a work ethic. With many failing to secure jobs after graduating from high school and college, analysts worry about U.S. competitiveness.

"Because of delays to their career, the skills set accumulation that normally happens in the first or third job is not happening," said Paul Conway, president of Generation Opportunity in Washington, a non-profit, non-partisan organization that works with 18- to 29-year-olds on economic issues.

TOUGH ON YOUNG WORKERS

Last month, the proportion of 20- to 24-year-olds in the labor force was its lowest since 1972. Other age categories are faring little better. The 25-54 age group has seen a decline of 1.8 percentage points since December 2007.

Some, like 27-year-old Casey Potts, have gone back to school. She is studying nursing in Kentucky after losing her medical sales job.

"If I had stayed in medical sales, I would be job searching now," said Potts.

But separate surveys by the Economic Policy Institute (EPI) and Generation Opportunity found little evidence that young people were going back to school when unable to land a job.

One deterrent is the rising cost of education and record levels of student debt. About two-thirds of 2012 college graduates left school in debt, owing on average $28,700 in student loans, according to Mark Kantrowitz, publisher of FinAid.org.

"Young people dropping out of the labor force to go back to school would be a silver lining if it were true," said Heidi Shierholz, a senior EPI economist, adding that enrollment had gradually been increasing for decades.

A Generation Opportunity survey published in August showed a third of young people were putting off additional training and post-graduate studies because of the sour economy.

"This is significant. People are making the decision to put those off because the assurance of a return to investment is not there," said the non-profit's Conway, a veteran observer of the labor market as a formerDepartment of Labor chief of staff.

He said his organization found that young people were doing unpaid internships at nonprofit groups and businesses to prevent their skills from atrophying. Others were joining the military.

Some economists say the participation rate does not paint a true picture because people find work in the informal sector, ranging from legal activities such as child care to crime in some cases.

"People are picking a buck here and there and not being reported in anybody's payroll," said Patrick O'Keefe, head of economic research at J.H. Cohn in Roseland, New Jersey.

"They will say they are not doing anything, even as they have a job and are being paid under the table," said O'Keefe, a former deputy assistant secretary at the Labor Department. "We do not know to what extent that is going on."

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