Missing the Point: The Chimera of “Full Participation”
October 9, 2012
Much ink has been spilled of late over employment rates– job creation, unemployment, and “participation.” While the first two are the most frequently cited as indicators, it’s the latter-most– the percent of Americans who are working– that, it is implicitly argued, speaks to the actual presence or absence of a recovery. If percentage participation returns to historical levels, our personal-income-converted-into consumption economy will recover.
But as the ever-illuminating Calculated Risk explains here and here, there are fundamental demographic reasons why participations rates won’t– can’t– return to their historic heights.
Some of the recent decline in the participation rate has been to due to cyclical issues (severe recession), but MOST of the decline in the overall participation rate over the last decade has been due to the aging of the population. There are also some long term trends toward lower participation for younger workers pushing down the overall participation rate.
This decline has been visible in prospect for years– demographic dynamics are very slow to change– and it’s going to continue, as this chart (based on BLS economist Mitra Toossi’s projections) illustrates:
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To put those rates into demographic prospective, this plot (from The Census Bureau) illustrates the “Baby-Boom-rabbit-passing through the snake” demographic dynamic that defines the U.S. today and into the future:
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The argument over employment these days is over how to increase participation; there’s implicit agreement that a) this is the right thing to do, because, b) it will create the conditions for a recovery. The problem is that, past a relatively minor point, we can’t. While the U.S. isn’t in nearly the demographic straight-jacket that binds most of Europe and Japan and China, there is a very real ceiling on participation… and that ceiling is falling.
So if we are to make a material dent in the problems that ail us, we’re going to have to respond differently than we have been.
For a start, we might note that the primary reason that we have are in a somewhat better demographic position than– that’s to say, not quite so aged as– other developed countries is that we’ve enjoyed strong immigration of relatively young (working and child-bearing aged) folks from countries/cultures that value family. That’s dropped off in the xenophobic wake of 9/11– and that’s aggravated our problem. There are myriad reasons that immigration reform is important; for the purposes of this argument, suffice it to say that it could go a long way toward replenishing and reinvigorating our work force– and generating the income on which our economy and the society it supports depend.
And we’re going to going to have to re-focus our efforts on creating new, higher-value-added kinds of jobs– and on creating the populace that can fill them. Even if there weren’t a falling ceiling on participation, it wouldn’t be enough simply to stamp out thousands of new low/minimum-wage service, retail, and health care jobs. If employees don’t earn enough to be viable consumers, the consumer economy– and the social services that depend on it– will continue to shrink.
At the same time, we need to be less concerned with recovering what we’ve lost; more, with trying to invent the new jobs– in alternative energy, biotech, nanotech. et al.– that can create enough value to allow for reasonable wages. And that of course means that we have also to be making the social and physical infrastructure investments– education/training, health care, transport, telecoms, et al.– that those emerging fields require… and that other countries are already making.
Of course, the devil is in the details of observations as over-arching (and, one hopes, obvious) as these; they are complex challenges, surely difficult to meet. But it’s the direction– and the commitment to that direction– that matters: if we are not, as a nation, even trying to meet them– and at the moment we are not– there’s no real chance that we will.
Auguste Comte may have over-reached when he said that “demography is destiny”; but demography is certainly a defining dynamic of the reality that we have, as a nation, to navigate. And so we’d do well to recognize demographic reality for what it is– and to stop arguing, as politicians on all sides have lately been doing, over the right ways to do the wrong things.
