Friday, December 30, 2011

Begging The Question On Labor Force Participation

Some analysts are trying to put a positive spin on the unprecedented drop in the labor force participation rate as simply being a question of more people seeking to get more education. I find it indeed quite likely too that a very large portion of those that have dropped out of the labor force have started in school again.

But that begs the question of why do they want to go back to school? Because it's fun or because it's interesting? Not likely, except perhaps for a small minority. Instead, the reason why they go back to school is because they're unable to find a job and thinks that additional education will enable them to get a job. That may perhaps be a good idea for the people in question, but that doesn't in anyway change their status as discouraged, hidden unemployed as almost all would quit school and immediately take a job if they could (at least assuming it's a steady job).


Blogger Ralph Musgrave said...

On the other hand, the Calculated Risk site linked to above has a chart which shows that the decline in participation rates began well before the current recession. So there could be some sort of long term trend reduction in participation rates mixed in with the effects of the recession.

Also, the peak in participation rates was around 2000, and this peak was reached after a 40 year steady increase. Changes in economic variables do not normally last this long without there being a kind of “set back” every now and then. See chart here:

So perhaps we are in a “set back” which might last ten years or so.

11:03 AM  

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