In his column this morning, David Wessel takes on a key economic question: “Job Market’s Vanishing Act: Seeking the Missing Five Million Workers”. The issue is the factg taht population has grown but the labor force (those employed or seeking employment) has not. There are a number of reasons why: more retirees, young people delaying entering the workforce, and people waiting for better times before looking. All of these play a factor, but Wessel gets quickly to the heart of the matter:
But the falling participation rate could signal a more worrisome dynamic: More jobless and disheartened workers turning to disability benefits or reluctant retirement, or otherwise leaving the workforce for good.
Not only is this a waste of human potential, but it diminishes the rate at which the U.S. economy can safely grow. It also creates a growing cadre of Americans who will need the support of the working population and makes the government budget deficit worse because there will be fewer workers to pay taxes. There’s no precise way to measure the size of this contingent. Official estimates of “discouraged workers” understate the problem; they count only those who say they want to work and have looked for a job in the past 12 months.
One thing is clear: The longer people remain out of work, the more risk they will fall out of the workforce altogether. Getting them back to work–or keeping them tied to the job market through training or volunteering or collecting unemployment compensation–would have long-lasting benefits.
Amen! Which is why I support a work-sharing arrangement – especially one ties to a skills improvement/training component. As I explained in an earlier posting, rather than reduce their hours, we should use those hours for training. It can be on-the-job training or classroom training.
This would have the dual effect: It would increase our human capital — a major input to the innovation ecosystem. And it would immediately increase consumer demand as companies would use the funds to pay workers to take classes (thereby creating more employments slots for others to fill the working hours of those in the classes).
As I have said over and over again, rather than pay workers to stand in unemployment lines or stay at home, let’s pay them to sit in a classroom.