Why Is Labor Force Participation Falling?

[djAdvocate]

rational choices!!!

www.incontext.indiana.edu/2013/mar-apr/article2.asp

Rational behavior and self-interest should indicate a positive relationship between economic growth and labor force participation. As the economy grows, more people should participate in the economy in an effort to reap the benefits of a stronger economy. However, the relationship between economic output and the labor force participation rate is not statistically significant. Rather, what is shown is that better economic conditions will only induce further participation when the benefits of a stronger economy are exhibited in higher wages. Increased per capita income is shown to be statistically significant with higher levels of labor force participation.

During the 2007-2009 recession, income levels and labor participation rates fell nationally. Since the trough of the recession, the economy has since grown at a slow pace. However, labor force participation growth has been more muted than the overall economy. Stagnant wages are one of the reasons for low participation. While the economy has grown at a slow pace, this has not translated to growth in wages. Wage growth has been stagnant. Labor force participation is shown to follow wages more than economic growth and, therefore, has been slow to recover as well.

want to increase WFP?  raise the minimum wage, for God's sake!

edit: HERE is the issue.  this graph is absolutely stomach turning:

[The Captain]

Or make the safety net less cushy...

[djAdvocate]

Oct 3, 2014 11:35:45 GMT -5 The Captain said:

Or make the safety net less cushy...

read the paper, Cap. 

edit: never mind- what i posted was the summary.

the paper studied the influence of UE benefits on the WFP and concluded that it is not a significant factor.  i could illustrate why i think this makes sense, but i have to go to work.

[djAdvocate]

Oct 3, 2014 12:07:42 GMT -5 deminmaine said:

I'm not sure that many of the 55+ people who left are coming back, at least in ways that can be measured.

Certainly increasing wages is one way to increase the participation level, to a point. Wages will start to rise soon I believe anyway, due to demand.

At the same time, I agree; raise the minimum wage.

one of the things that this paper points out is that WFP is very closely tied to home ownership.  some of you might want to compare this graph to WFP.

[The Captain]

Oct 3, 2014 12:14:42 GMT -5 Sum Dum Gai said:

 Or make the safety net less cushy... 

That's one way to go, but it's such a small step.  Why not go whole hog?  Bring back slavery.  Set a date.  Say July 4th 2015.  On that day every single American will be declared property and auctioned off, unless they pay Uncle Sam a $5k freedom fee.  Those that can't come up with the money, can be sold to businesses.  The money can be used to pay the deficit or something.  No more welfare, a US workforce that can finally undercut foreign workers, the illegals will self deport in fucking droves.  Let's bring this country back to greatness!

Hyperbole and hysterics, really?

Comon.  There are people on this very board who have repeatedly stated they are too good to do certain types of jobs.

Umm, well - count me out on that one.  I guess being poor and the safety net aren't all that bad if work is a worse alternative.

[djAdvocate]

Oct 3, 2014 12:14:42 GMT -5 Sum Dum Gai said:

 Or make the safety net less cushy... 

That's one way to go, but it's such a small step.  Why not go whole hog?  Bring back slavery.  Set a date.  Say July 4th 2015.  On that day every single American will be declared property and auctioned off, unless they pay Uncle Sam a $5k freedom fee.  Those that can't come up with the money, can be sold to businesses.  The money can be used to pay the deficit or something.  No more welfare, a US workforce that can finally undercut foreign workers, the illegals will self deport in fucking droves.  Let's bring this country back to greatness!

i have argued on this board that what is actually going on is not significantly better than this option.  if you are working 80 hours a week just to support yourself and your family, and you are one injury away from bankruptcy, a benign slavery might be preferable.

edit: and yes, i know you were being sarcastic.

[The Captain]

We talk about raising the minimum wage and the fact that eveyone who breaths is entitled to a "living wage".

What about the people who currently have mcjobs because they truly aren't motivated or qualified to do anything else?  How do they suddenly become worth $15 or more an hour?  If we improve the minimum wage maybe workforce participation rates will increase among those with stronger skill sets, but those with no skill sets will surely be pushed out because they are simply too expensive to keep around.

AND we already have a problem with workers on the lowest end of the wage spectrum being pushed aside by people from countries with even more depressed wages who are happy to work for $8-10 and hour. 

How exactly is raising the minimum wage going to fix that?

[djAdvocate]

Oct 3, 2014 12:34:10 GMT -5 The Captain said:

We talk about raising the minimum wage and the fact that eveyone who breaths is entitled to a "living wage".

you know that is why that the minimum wage was set up, right?

i think it is really weird that this IDEA is so disparaged. 

[djAdvocate]

Oct 3, 2014 12:34:10 GMT -5 The Captain said:

What about the people who currently have mcjobs because they truly aren't motivated or qualified to do anything else?  

i think you are asking the wrong question.  the question (for ME) is this:

what does it take to have a thriving middle class and strong economic growth?

this piety in terms of the "worthy" and "unworthy" is really tiresome.  is Romney worthy $50M/year?  very doubtful.

[The Captain]

Oct 3, 2014 12:21:30 GMT -5 Sum Dum Gai said:

Hyperbole and hysterics, really?

How do you know I wasn't serious?  This is the internet dude, I could be that stupid.

No Dark, you've posted too much on here for anyone to think you're stupid .  I'm willing to bet you're in the top 5-10% smarts wise.

Germany, for example, has very high minimum wages amounts.  I'd love to know exactly how they address some of the ecomonic issues I mentioned in my prior posting.

Personally, I would love to have everyone gainfully employed in a job they love where they can support their family. 

The reality is that not everyone will get to be a movie star, singer, baseball player, etc.  Someone will have to change soiled sheets at hospitals, do the laundry at hotels, and scrub pots and pans in the kitchen.  I've done two out of the three of those jobs btw and don't minimize the value they provide, but let's be honest - not a lot of skill involved.

And, again, we all know there are people who do not want to work, and will do the absolute minimum they can get away with.  Exactly how much is that worth per hour again?

[djAdvocate]

Cap- if you want to go all soap boxy on me, let me have a shot:

once upon a time there were trade unions.  they used to train unskilled workers without degrees to do high skilled jobs.  that contributed to productivity gains, which the unions asked for, in return, in the form of higher wages.  the union system is now utterly decimated, and skill levels have been falling for decades for those with no degrees.

from my perspective, there are only THREE solutions.  either businesses can pick up the slack, unions can magically get to a place where they can do it again, or the government has to step in with trade skills training programs (at considerable cost to be borne by who?).  i think options 1&2 are utterly non-starters.

[The Captain]

Oct 3, 2014 12:35:02 GMT -5 djAdvocate said:

Oct 3, 2014 12:34:10 GMT -5 The Captain said:

We talk about raising the minimum wage and the fact that eveyone who breaths is entitled to a "living wage".

you know that is why that the minimum wage was set up, right?

i think it is really weird that this IDEA is so disparaged. 

So is a single mother with four kids and no other income supposed to be worth more per hour than a 19yo single male?

They both would give you very different numbers as to what constitutes a living wage.

[djAdvocate]

Oct 3, 2014 12:37:36 GMT -5 Sum Dum Gai said:

How do they suddenly become worth $15 or more an hour?

The same way a loaf of bread became worth $1.50 instead of a nickel.  Inflation.  We've had it on everything we buy, but haven't had any in our paychecks for a while.  In a very real sense US workers have been getting annual paycuts for years.  They're worth more because they should be worth what they were years ago.  The labor they're doing didn't go down in value to the company, but by keeping wages flat while everything else inflates they've been cutting their workers pay year after year.

what Obama has proposed would be less, in inflation adjusted terms, than the peak of FMW in 1973. 

so, really- what we are talking about here, is getting the lower class back to where they were FORTY YEARS AGO.

[djAdvocate]

Oct 3, 2014 12:42:34 GMT -5 The Captain said:

Oct 3, 2014 12:35:02 GMT -5 djAdvocate said:

you know that is why that the minimum wage was set up, right?

i think it is really weird that this IDEA is so disparaged. 

So is a single mother with four kids and no other income supposed to be worth more per hour than a 19yo single male?

They both would give you very different numbers as to what constitutes a living wage.

let me be clear- i have actually not advocated a living wage, here.  i have just questioned why it is such a horrible idea.

i have an answer to your question tho: a living wage should only apply to a single person, imo.  if we can't even keep THAT person off food stamps, then the welfare state has truly won.

[djAdvocate]

Oct 3, 2014 12:40:56 GMT -5 The Captain said:

Oct 3, 2014 12:21:30 GMT -5 Sum Dum Gai said:

How do you know I wasn't serious?  This is the internet dude, I could be that stupid.

No Dark, you've posted too much on here for anyone to think you're stupid .  I'm willing to bet you're in the top 5-10% smarts wise.

Germany, for example, has very high minimum wages amounts.  I'd love to know exactly how they address some of the ecomonic issues I mentioned in my prior posting.

Personally, I would love to have everyone gainfully employed in a job they love where they can support their family. 

The reality is that not everyone will get to be a movie star, singer, baseball player, etc. 

red herring.  very few people are even suggesting $15/hr for FMW.  most are suggesting $10.  that is not going to make you a movie star, even in India, where wages are considerably lower.  the average Bollywood star makes $4m/picture.

Someone will have to change soiled sheets at hospitals, do the laundry at hotels, and scrub pots and pans in the kitchen.  I've done two out of the three of those jobs btw and don't minimize the value they provide, but let's be honest - not a lot of skill involved.

And, again, we all know there are people who do not want to work, and will do the absolute minimum they can get away with.  Exactly how much is that worth per hour again?

i think this is a matter for public debate, but i would vote for "that which leads to a life of dignity".

[ArchietheDragon]

Ebola will bring the labor participation labor rate back up. 

[The Captain]

Oct 3, 2014 12:41:02 GMT -5 djAdvocate said:

Cap- if you want to go all soap boxy on me, let me have a shot:

once upon a time there were trade unions.  they used to train unskilled workers without degrees to do high skilled jobs.  that contributed to productivity gains, which the unions asked for, in return, in the form of higher wages.  the union system is now utterly decimated, and skill levels have been falling for decades for those with no degrees.

from my perspective, there are only THREE solutions.  either businesses can pick up the slack, unions can magically get to a place where they can do it again, or the government has to step in with trade skills training programs (at considerable cost to be borne by who?).  i think options 1&2 are utterly non-starters.

In my area the government has stepped up with trade skills training programs.  We have a very robust community college system that covers everything from welding to HVAC and diesel engine repair.  The son of a friend finished the welding program a few years ago and told me employers were hiring the kids even before graduation.

Despite this, and the fact that they would go for free due to family income levels, I have relatives that don't have to get their HS sophmore dropout skills upgraded because their kids are fed, they have health and dental care, and their housing is provided for.  Only one parent works (part-time) for gas and clothing money and to keep their car running.  This has been the status quo for over 16 years.  Granted, it took them 6 years on a waiting list for the housing but now that they have the voucher, they have it as long as their income qualifies them.

OTOH I know someone who had to leave college and got a job at a local big box store.  Within 6 months he got certified in three different areas (forklift, cherry picker (can't remember the real name), and something else.  He's now pulling in over $16 an hour and is covering all of his community college costs and saving for when he graduates. 

I just don't see the minimum wage/living wage crisis in my area.  Those jobs are usually a stepping stone to higher paying jobs or held by people who don't have marketable skill sets and have no desire to gain them.

[The Captain]

Oct 3, 2014 12:44:39 GMT -5 djAdvocate said:

Oct 3, 2014 12:42:34 GMT -5 The Captain said:

So is a single mother with four kids and no other income supposed to be worth more per hour than a 19yo single male?

They both would give you very different numbers as to what constitutes a living wage.

let me be clear- i have actually not advocated a living wage, here.  i have just questioned why it is such a horrible idea.

i have an answer to your question tho: a living wage should only apply to a single person, imo.  if we can't even keep THAT person off food stamps, then the welfare state has truly won.

Well, I would agree that a single person who works 40 hours a week should be able to support themself (with a roommate depending on the COLA).

[djAdvocate]

Oct 3, 2014 13:04:42 GMT -5 The Captain said:

Oct 3, 2014 12:41:02 GMT -5 djAdvocate said:

Cap- if you want to go all soap boxy on me, let me have a shot:

once upon a time there were trade unions.  they used to train unskilled workers without degrees to do high skilled jobs.  that contributed to productivity gains, which the unions asked for, in return, in the form of higher wages.  the union system is now utterly decimated, and skill levels have been falling for decades for those with no degrees.

from my perspective, there are only THREE solutions.  either businesses can pick up the slack, unions can magically get to a place where they can do it again, or the government has to step in with trade skills training programs (at considerable cost to be borne by who?).  i think options 1&2 are utterly non-starters.

In my area the government has stepped up with trade skills training programs.  We have a very robust community college system that covers everything from welding to HVAC and diesel engine repair.  The son of a friend finished the welding program a few years ago and told me employers were hiring the kids even before graduation.

Despite this, and the fact that they would go for free due to family income levels, I have relatives that don't have to get their HS sophmore dropout skills upgraded because their kids are fed, they have health and dental care, and their housing is provided for.  Only one parent works (part-time) for gas and clothing money and to keep their car running.  This has been the status quo for over 16 years.  Granted, it took them 6 years on a waiting list for the housing but now that they have the voucher, they have it as long as their income qualifies them.

OTOH I know someone who had to leave college and got a job at a local big box store.  Within 6 months he got certified in three different areas (forklift, cherry picker (can't remember the real name), and something else.  He's now pulling in over $16 an hour and is covering all of his community college costs and saving for when he graduates. 

I just don't see the minimum wage/living wage crisis in my area.  Those jobs are usually a stepping stone to higher paying jobs or held by people who don't have marketable skill sets and have no desire to gain them.

i didn't claim that there was a crisis in the minimum wage.  what i claimed is that the virtuous cycle is broken.  minimum wage is, in fact, a very small part of that problem, imo.  perhaps...10%?  not really of great concern to me.  wages not keeping up with productivity is of great concern to me.

edit: i do think, however, that even a modest uptick in FMW might reverse the red ink on the graph in post 1.

[Deleted]

Oct 3, 2014 11:33:37 GMT -5 djAdvocate said:

rational choices!!!

www.incontext.indiana.edu/2013/mar-apr/article2.asp

Rational behavior and self-interest should indicate a positive relationship between economic growth and labor force participation. As the economy grows, more people should participate in the economy in an effort to reap the benefits of a stronger economy. However, the relationship between economic output and the labor force participation rate is not statistically significant. Rather, what is shown is that better economic conditions will only induce further participation when the benefits of a stronger economy are exhibited in higher wages. Increased per capita income is shown to be statistically significant with higher levels of labor force participation.

During the 2007-2009 recession, income levels and labor participation rates fell nationally. Since the trough of the recession, the economy has since grown at a slow pace. However, labor force participation growth has been more muted than the overall economy. Stagnant wages are one of the reasons for low participation. While the economy has grown at a slow pace, this has not translated to growth in wages. Wage growth has been stagnant. Labor force participation is shown to follow wages more than economic growth and, therefore, has been slow to recover as well.

want to increase WFP?  raise the minimum wage, for God's sake!

edit: HERE is the issue.  this graph is absolutely stomach turning:

All those posts on other threads where you quoted me and basically have said over and over again that you don't give a rats ass about the WFP. Why the sudden interest? Are you looking for a subject vehicle to hitch the minimum and lagging wage pitch?

[The Captain]

Oct 3, 2014 13:07:33 GMT -5 djAdvocate said:

Oct 3, 2014 13:04:42 GMT -5 The Captain said:

i didn't claim that there was a crisis in the minimum wage.  what i claimed is that the virtuous cycle is broken.  minimum wage is, in fact, a very small part of that problem, imo.  perhaps...10%?  not really of great concern to me.  wages not keeping up with productivity is of great concern to me.

Ahh.  I completely missed that. 

As far as wages not keeping up with productivity - we've touched on the whole outsourcing vs. automation thing several times so I won't keep dragging in that horse. 

On a Macro basis yes, wages have not kept up with productivity.  On a micro basis, there are fewer workers needed to produce the increased output so I'm not sure that is a good comparison.

Of greater interest to me is how the economics shifted so that the top .1-.5% had such enormous increases in income.  Understanding how to mitigate that, and bring back more manufacturing, is what I think this country needs.

[djAdvocate]

Oct 3, 2014 13:11:56 GMT -5 @jma23 said:

Oct 3, 2014 11:33:37 GMT -5 djAdvocate said:

rational choices!!!

www.incontext.indiana.edu/2013/mar-apr/article2.asp

Rational behavior and self-interest should indicate a positive relationship between economic growth and labor force participation. As the economy grows, more people should participate in the economy in an effort to reap the benefits of a stronger economy. However, the relationship between economic output and the labor force participation rate is not statistically significant. Rather, what is shown is that better economic conditions will only induce further participation when the benefits of a stronger economy are exhibited in higher wages. Increased per capita income is shown to be statistically significant with higher levels of labor force participation.

During the 2007-2009 recession, income levels and labor participation rates fell nationally. Since the trough of the recession, the economy has since grown at a slow pace. However, labor force participation growth has been more muted than the overall economy. Stagnant wages are one of the reasons for low participation. While the economy has grown at a slow pace, this has not translated to growth in wages. Wage growth has been stagnant. Labor force participation is shown to follow wages more than economic growth and, therefore, has been slow to recover as well.

want to increase WFP?  raise the minimum wage, for God's sake!

edit: HERE is the issue.  this graph is absolutely stomach turning:

All those posts on other threads where you quoted me and basically have said over and over again that you don't give a rats ass about the WFP. Why the sudden interest? Are you looking for a subject vehicle to hitch the minimum wage pitch?

i don't give a rat's ass, in terms of economics.  i really don't.  but that doesn't mean i am NOT INTERESTED IN UNDERSTANDING IT, jma.

i am interested in a LOT OF STUFF that i don't think is very impactful.  Sarah Palin, for example. 

[djAdvocate]

Oct 3, 2014 13:14:11 GMT -5 The Captain said:

Oct 3, 2014 13:07:33 GMT -5 djAdvocate said:

i didn't claim that there was a crisis in the minimum wage.  what i claimed is that the virtuous cycle is broken.  minimum wage is, in fact, a very small part of that problem, imo.  perhaps...10%?  not really of great concern to me.  wages not keeping up with productivity is of great concern to me.

Ahh.  I completely missed that. 

As far as wages not keeping up with productivity - we've touched on the whole outsourcing vs. automation thing several times so I won't keep dragging in that horse. 

outsourcing, yes.  automation, no.  automation has HISTORICALLY lead to HIGHER wages, not lower (i know it is counterintuitive). 

On a Macro basis yes, wages have not kept up with productivity.  On a micro basis, there are fewer workers needed to produce the increased output so I'm not sure that is a good comparison.

i am not making a "comparison", i am stating a fact: for (150) years, wages kept up with productivity.  that is a FACT.  you seem to think there is one reason for that FACT, whereas i think there is another reason for that FACT.  but rather than you guessing mine, and me guessing you reason, why do you think this FACT is?

Of greater interest to me is how the economics shifted so that the top .1-.5% had such enormous increases in income.  Understanding how to mitigate that, and bring back more manufacturing, is what I think this country needs.

if the increases in productivity were PROPORTIONALLY shared, there would be no Gini-skewing.  eye candy:

[Opti]

Oct 3, 2014 12:07:42 GMT -5 deminmaine said:

I'm not sure that many of the 55+ people who left are coming back, at least in ways that can be measured.

Certainly increasing wages is one way to increase the participation level, to a point. Wages will start to rise soon I believe anyway, due to demand.

At the same time, I agree; raise the minimum wage.

I get this, because I am living it and know other people who are.

Those who can't go on permanent disability or live off someone are coming

back. Its a question of when and how. I had a book I found at the library

that explained what most 50 to 60 somethings did to have successful work lifes.

(Many things can be measured, it just that we need to look at employment

and unemployment in a more wholistic manner. )

[Deleted]

Oct 3, 2014 13:15:15 GMT -5 djAdvocate said:

Oct 3, 2014 13:11:56 GMT -5 @jma23 said:

All those posts on other threads where you quoted me and basically have said over and over again that you don't give a rats ass about the WFP. Why the sudden interest? Are you looking for a subject vehicle to hitch the minimum wage pitch?

i don't give a rat's ass, in terms of economics.  i really don't.  but that doesn't mean i am NOT INTERESTED IN UNDERSTANDING IT, jma.

i am interested in a LOT OF STUFF that i don't think is very impactful.  Sarah Palin, for example. 

Thanks for the clarification. Wasn't trying to be offensive, just my usual blunt self. I did add lagging wages to that post, but you were quoting before I changed it. Is it just me, or would Sarah Palin fit right in on that Duck Dynasty TV show?

[Opti]

Oct 3, 2014 11:35:45 GMT -5 The Captain said:

Or make the safety net less cushy...

I guess massive stress helps you be more efficient?

The good news for those who are into this(safety net cutting), I know of at least three long-time

unemployed people who died before they hit 60. One was pretty brilliant with software.

[djAdvocate]

NOTE: the graph in post (1) is hard to read in the following sense:

it shows the current value of a five year trend.

when the 5Y wage growth went negative in 2010, that means that in the period between 2005 and 2010, there was no wage growth.

[Deleted]

Oct 3, 2014 13:18:37 GMT -5 djAdvocate said:

Oct 3, 2014 13:14:11 GMT -5 The Captain said:

Ahh.  I completely missed that. 

As far as wages not keeping up with productivity - we've touched on the whole outsourcing vs. automation thing several times so I won't keep dragging in that horse. 

outsourcing, yes.  automation, no.  automation has HISTORICALLY lead to HIGHER wages, not lower (i know it is counterintuitive). 

On a Macro basis yes, wages have not kept up with productivity.  On a micro basis, there are fewer workers needed to produce the increased output so I'm not sure that is a good comparison.

i am not making a "comparison", i am stating a fact: for (150) years, wages kept up with productivity.  that is a FACT.  you seem to think there is one reason for that FACT, whereas i think there is another reason for that FACT.  but rather than you guessing mine, and me guessing you reason, why do you think this FACT is?

Of greater interest to me is how the economics shifted so that the top .1-.5% had such enormous increases in income.  Understanding how to mitigate that, and bring back more manufacturing, is what I think this country needs.

if the increases in productivity were PROPORTIONALLY shared, there would be no Gini-skewing.

I think the fact is that union membership is steadily dropping as % of the population. The union pay scales which are a part of wage versus productivity number could not withstand the forces of the globalization of business. For one, GM has reduced wage and benefits for new workers through the union agreements to keep the company from going under.

[Deleted]

Oct 3, 2014 13:18:37 GMT -5 djAdvocate said:

Oct 3, 2014 13:14:11 GMT -5 The Captain said:

Ahh.  I completely missed that. 

As far as wages not keeping up with productivity - we've touched on the whole outsourcing vs. automation thing several times so I won't keep dragging in that horse. 

outsourcing, yes.  automation, no.  automation has HISTORICALLY lead to HIGHER wages, not lower (i know it is counterintuitive). 

On a Macro basis yes, wages have not kept up with productivity.  On a micro basis, there are fewer workers needed to produce the increased output so I'm not sure that is a good comparison.

i am not making a "comparison", i am stating a fact: for (150) years, wages kept up with productivity.  that is a FACT.  you seem to think there is one reason for that FACT, whereas i think there is another reason for that FACT.  but rather than you guessing mine, and me guessing you reason, why do you think this FACT is?

Of greater interest to me is how the economics shifted so that the top .1-.5% had such enormous increases in income.  Understanding how to mitigate that, and bring back more manufacturing, is what I think this country needs.

if the increases in productivity were PROPORTIONALLY shared, there would be no Gini-skewing.

Our wages moved too high as compared to the global economic scale. Basically the whole world has entered the modern industry age. A country with a lower living standard can compete on the global market better than the higher wage and tax enviroment of the US. As more and more formerly 3rd world countries move up the capability ladder. We become less competetive, and our living standard (through lost wages) continues to drop.

[djAdvocate]

Oct 3, 2014 13:35:06 GMT -5 @jma23 said:

Oct 3, 2014 13:18:37 GMT -5 djAdvocate said:

if the increases in productivity were PROPORTIONALLY shared, there would be no Gini-skewing.

I think the fact is that union membership is steadily dropping as % of the population. The union pay scales which are a part of wage versus productivity number could not withstand the forces of the globalization of business. For one, GM has reduced wage and benefits for new workers through the union agreements to keep the company from going under.

the wages in Germany are 2x what the US auto industry paid, and they don't seem to be in an existential battle for survival.

therefore, i surmise that GM's problems had little to do with how much money they were paying their workers.