What’s Up (or Down) with Labor Force Participation?
In this country, we measure employment according to two very different sets of numbers: The Unemployment Rate and the Labor Market Participation Rate. They may sound the same, but they’re actually completely different.
The official “unemployment rate” measures the percent of people who are actively looking for work but can’t find it. According to the Bureau of Labor Statistics, the national average unemployment rate was just 3.6 percent in January. Based on that, most people would believe that the economy is in great shape: Almost everyone is working. But that’s hardly the case.
The key phrase is “actively looking for work.” Because while the active workforce in the U.S. is almost 260 million people, there are about 95 million individuals who are “not in the labor force.” That’s almost 37% of all potential workers, leaving us with a Labor Market Participation Rate of just 63% (data also from the BLS).
There’s an excellent article about this by Terry Jones, from February 14, 2020, in Investor’s Business Daily. Link: https://www.investors.com/news/labor-force-participation-rate-low/
Here’s the trend: In the year 2000, 67 percent of all potential workers were in the labor force, actively working or looking for work. Now, 20 years later, that participation rate is down to just over 63 percent. That drop in the percentage of people “in the labor force” means that if we still had the participation rate from 2000, there would be 6.6 million more people in the labor force right now.
Here’s what’s even more perplexing: the percentage of so called “prime-age” men, those who are age 25-54, in the U.S. is at a historically low rate; and those are not just all stay-at-home dads. This low participation rate doesn’t seem to be good, either for many of the men themselves or for the U.S. economy, which could benefit greatly if more Americans were actively working.
Why the Dropoff in the Labor Force?
Researchers tell us there’s no single reason why the participation rate for prime-aged men has gone down. It is a combination of factors, including health issues (almost 50 percent), retirements (10 percent), attending school (14 percent), and taking the role of stay-at-home dads (about 15 percent), and so-called “discouraged” workers (12 percent). (Note: the numbers are rounded so don’t add up perfectly to 100 percent). About half of “inactive” men cite serious mental and physical health issues, and in order to receive federal disability subsidies, the rules require you to be declared completely incapable of work. One of three inactive men were previously incarcerated individuals and have a felony record, and still face real employment barriers.
The data, of course, are all self-reported, so we only know the reasons for leaving the workforce that the individual chooses to identify. The data cited here, for example, doesn’t tell us how many of these inactive workers are struggling with drug and alcohol addictions, and those problems certainly exacerbate their disconnection from the workforce.
While every individual reason for disconnecting may seem valid, there still seems to be a bigger trend problem with labor force participation in the U.S. in comparison to other large economy nations. The U.S. labor force participation for “prime-age workers” is significantly lower than France, Germany, Japan and Britain, according to an OECD study. The U.S. does exceed Italy in terms of prime-age participation, but Italy has a much weaker economy.
Suggestions for Career Connected Learning: Prevention is the Best Cure
While the causes for the drop-off in workforce participation are varied and a bit confusing, none of the solutions are easy. Some have to do with disability policy and hiring policies. Among two leading solutions are “more job training for those with little education or professional skills” and “a greater focus on vocational education for non-college youths.”
One of these solutions is aimed at working-age adults, helping them get more education and training, which is essential. Getting them motivated and activated to access education and training is a massive challenge.
The second recommendation focuses on youth still in school. I believe we need Career Connected Learning for ALL youths, not just “vocational training for non-college youths” which is a well-intended but a limiting framework.
Instead of just focusing on vocational training, we should focus on the Career Connected Learning (CCL) strategies that are preventative – that can help the 15.4 million young people currently enrolled in grades 9-12, to make sure they are better equipped to navigate careers and life.
Here are four ideas to pursue.
- Use Career Connected Learning strategies to help all 15 million public school teens graduate from high school by making school more relevant. There are still 800,000 to a million youths who drop out of school each year; these youth are certainly at a very high risk of having employment problems and leaving the workforce altogether.
- Implement CCL so that all youth understand career opportunities before they make a firm postsecondary education decision. This career understanding is just as valuable for academically on-track students who plan to attend a four-year college/university, as for those students who want to pursue some other type of skills training or postsecondary degree.
- Utilize CCL strategies to help make sure that youth develop “Career Navigation Skills.” Career Navigation Skills are the understandings and capabilities to seek and secure a job, to learn new skills and work with positive impact to advance in their career, and to make the big shifts from one career path to another, when necessary. Career Navigation Skills can help a worker stay relevant in the workplace and also bounce back when they experience career setbacks.
- Finally, I believe we need more innovation as to what CCL looks like, particularly in rural settings. When I say rural settings, I’m thinking about school districts that have low student enrollments (less than 500 in grades 9-12), limited financial resources, difficulty finding teachers with career specializations, and limited access to local business and industry. In these rural settings, it may be that pathway programs need to be more of a hybrid among pathways instead of just focusing on one career cluster and pathway. Perhaps schools could develop a pathway program that synthesizes business—marketing–information tech—engineering–manufacturing, and another that synthesizes business—hospitality—tourism—agriculture–natural resources. In these rural settings, innovative approaches to pathway programs might broaden the availability of Career Connected Learning to more students, helping them develop career skills that might be more applicable and adaptable to a rural setting if that’s where they choose to live as adults.
It’s clear that too many Americans are disconnected from the workforce because they have struggled and not been able to adapt to life and work challenges that came their way. Career Connected Learning is not a panacea to life and societal challenges, but it can better equip today’s discouraged workers, but even more importantly, the next generation of workers to adapt to changing demands and stay productively connected to meaningful work.
Hans Meeder is President of NC3T, the National Center for College and Career Transitions (www.nc3t.com). NC3T provides planning, coaching, technical assistance and tools to help community-based leadership teams plan and implement their college-career pathway systems and strengthen employer connections with education.