May 16, 2016

The Decline of the American Workforce

Published by Vox_Veritas

 

The annual US GDP growth rate is not what it used to be; today’s highs are moderate compared to the growth rates which existed decades ago. There are, of course, a myriad of factors which explain this. However, one commonly overlooked factor is the decline of the American workforce. In this article I will give the reader a quick rundown of the current state of the American workforce.

The first thing I should point out is that the commonly cited unemployment rate should be taken with a grain of salt. Allow me to explain. According to Wikipedia, the unemployment rate is measured as the percentage of members of the labor force who are counted as unemployed. This methodology is inherently flawed, and I’ll show you why.

According to a FAQ page from the Bureau of Labor Statistics which exists to answer questions about its methodology, a person is counted as employed by the BLS if they reported having done any form of paid work during a Survey Reference Week. If a person had a job during a Survey Reference Week but was not at work due to being on vacation, being ill, experiencing child care problems, on maternity or paternity leave, taking care of some other family or personal obligation, involved in a labor dispute, or prevented from working by bad weather, then that person is counted as “with a job but not at work”, which still counts as employment. According to this same source, a person is counted as unemployed if they do not have a job, have actively looked for (paid) work at some point within four weeks prior to the Survey Reference Week, and are currently available for work. A person is counted as “not in the labor force” if a person has no job and is not looking for one (which most likely means X person has not looked for work within four weeks prior to the Survey Reference Week). People commonly in this category include students and retired people.

Now do you understand? If you’re not looking for a job, then you’re now counted as being in the workforce, and as such you do not count as unemployed. A better methodology, then, would be to talk about an employment rate rather than an unemployment rate.

According to the census.gov’s population clock, on May 3, 2016 the US population was at above 323 million people. According to another BLS webpage, in March 2016 the total Civilian Noninstitutional Population was 252,768,000. The BLS defines the Civilian Noninstitutional Population (for brevity’s sake we’ll just use the term “CNP”) as the population of Americans who are not in the military and are not institutionalized in a prison, psychiatric hospital, or retirement home. Of these 252,768,000 people 158,854,000 were counted as either employed or unemployed. If we round to 2.53 million people equaling 1% of the CNP, this amounts to an actual employment rate of around 63%. Even this number is fudged a bit because one still has to take into account those 70 million institutionalized/non-civilian people. There were 1.133 million law enforcement officers in the United States in 2008 (assuming that we should count them in the CNP category) according to the Bureau of Justice Statistics, and the Department of Defense had 3.23 million employees in 2009. This still comes up to less than 5 million people out of 70 million (or 1/14th). A large number of prisoners are employed to some capacity, but in 2011 there were only 2,266,800 adult prisoners in the United States. There is still a very large number of institutionalized/non-civilian people remaining who aren’t prisoners, soldiers, or police officers. People in retirement homes and people in psychiatric hospitals generally don’t work, so this should drive up the total percentage of Americans who are part of the labor force below 63% (possibly below 60%).

My second point is that Americans are working fewer hours than ever before. To demonstrate this point, I would like to point out that in the 19th century a 60-hour workweek was commonplace, whereas such an arrangement is fairly rare today. As of August 2013, the average American works 1703.55 hours annually, which translates to 32.76 hours a week.

My third point is that more Americans are of retirement age than ever before. In 1900, 1 in 25 Americans were 65 years old or more. In 1994, that number had risen to 1 in 8 (which amounts to roughly 12.5% of the population). In 2013 that number was 14.1%. In 2011 it was projected by the Administration on Aging that by 2030 72.1 million Americans would be 65 years old or more, despite the fact that the US population at this point is projected to be 359.1 million (just shy of 360 million). This amounts to slightly over 20% of the US population being over the age of 65 by 2030.

In this article an important cause for slowing US economic growth has been exposed. As economic growth continues to decline, expect for the US’s economic superpower status to wane. As this happens, also expect for the US’s influence in the world to decline. For Americans, the prognosis isn’t good. The only remaining question is…will America change? Can it change?

 

Sources:

http://www.multpl.com/us-gdp-growth-rate/table/by-year

http://www.bls.gov/cps/cps_htgm.htm

http://www.bls.gov/news.release/empsit.t01.htm

http://www.bls.gov/bls/glossary.htm

http://eh.net/encyclopedia/hours-of-work-in-u-s-history/

http://www.theblaze.com/stories/2013/08/19/charts-showing-just-how-much-americans-work-compared-to-the-french-germans-and-chinese-are-very-interesting/

https://www.census.gov/population/socdemo/statbriefs/agebrief.html

http://www.aoa.acl.gov/aging_statistics/index.aspx

http://www.aoa.gov/Aging_Statistics/Profile/2011/4.aspx

http://www.statista.com/statistics/183481/united-states-population-projection/

Advertisements