Who Is Working, What Is Not Working

I reviewed the recent Bureau of Labor Statistics jobs data over the weekend as well as several reports on unemployment (and employment).  On Thursday night we will hear the long-awaited address by President Obama on how he proposes to create more jobs.

I wrote about the employment rate back in March in "Employed Or Unemployed" where I made the point that while the unemployment rate was an important statistic, the labor participation rate is actually a better indicator to monitor.  It is really about the percent of people that are employed than the percent that are unemployed.  The unemployment rate was 8.9% when I wrote that blog back in early March.  We are at 9.1% in the latest report.

Here is a chart from the Calculated Risk Chart Gallery that shows the drop in the labor participation rate (blue line) as well as the precipitous decline in the employment-population ratio (black line) and how it compares to prior years.  The employment-population ratio is the percent of the population 16 years or older that is currently employed in the civilian work force.  At the end of August that percentage is 58.5%.  9.1% are officially unemployed meaning they are actively seeking a job but can't find one.  That means that an additional 32.4% is not working and not looking.  This may include students, stay at home parents, retirees and those who are simply discouraged and have quit even looking for work.

Here is another view of this statistic that isolates the employment population ratio and shows its history since shortly after WWII.

Let's compare the overall % to different demographic and age groups and also to the comparable numbers in 1950, 1975 and 2000.

• In total, 58.5% are working today vs. 59.2%(1950), 61.2%(1975) and 67.1%(2000)
• Men, ages 25-54, 81.9% today vs. 96.5%(1950), 94.4%(1975) and 91.6%(2000)
• Women, ages 25-54, 68.3% today vs. 36.8%(1950), 55.1%(1975) and 76.7%(2000)
• Both sexes, 55 and older, 37.3% today vs. 43.0%(1950), 34.7%(1975) and 32.4%(2000)
• All, Ages 16-19, 28.6% today vs. 47.0%(1950), 46.0%(1975) and 45.0%(2000)

I could not find data on the African American employment-population ratio dating back to 1950 but here is a chart showing the ratio since 1972.  It is not a pretty picture.

Walter Williams writes about black unemployment in last week's Washington Examiner.

Overall U.S. unemployment is 9.1 percent. For white adults, it's 8 percent, and for white teens, 23 percent. Black adult unemployment stands at 17 percent, and for black teens, it's 40 percent, more than 50 percent in some cities, for example, Washington, D.C.

Chapter 3 of "Race and Economics," my most recent book, starts out, "Some might find it puzzling that during times of gross racial discrimination, black unemployment was lower and blacks were more active in the labor force than they are today."

Up until the late 1950s, the labor-force participation rate of black teens and adults was equal to or greater than their white counterparts. In fact, in 1910, 71 percent of black males older than 9 were employed, compared with 51 percent for whites.

Williams cites the biggest factor in keeping blacks jobless are minimum wage laws.

Good intentions motivate most Americans in their support for minimum wage laws, but for compassionate public policy, one should examine the laws' effect.

That's seen by putting oneself in the place of an employer and asking, "If I must pay $7.25 an hour to no matter whom I hire, does it pay me to hire a worker who's so unfortunate as to have skills that enable him to produce, say, only $4 worth of value an hour?"

Most employers would view hiring such a worker as a losing economic proposition; therefore, a minimum wage law discriminates against low-skilled workers by reducing employment opportunity.

Being unemployed has significant negative social consequences, one of them noted in the 1960s by Sen. Daniel Patrick Moynihan, D-N.Y., who raised the alarm about the link between joblessness and the decline of the black family, saying that men without work become less attractive as marriage partners.

Between 1890 and 1940, a slightly higher percentage of black adults had married than white adults. Today, black marriage rates have fallen precipitously, where 72 percent of black children are born to unwed mothers.



Good intentions are behind most liberal policies. Like the minimum wage laws. It is almost impossible to argue against them in spirit. It is only when you see the practical result of their impact on what they do in the real world with real human beings that you see the fatal flaws. Are the minimum wage laws having an impact on the high unemployment rates of teens and blacks? I don't know but the federal minimum wage increased 37% from where it was in mid 2007 to where it is today. This is also when employment started to drop rather dramatically for these two demographic groups. To put this in context, the minimum wage only increased 42% between 1981 and 1996.

It has been said that the road to perdition is filled with good intentions. We are likely to hear about a lot of well intentioned ideas from President Obama on Thursday night. Further extend unemployment benefits. Extend the Social Security payroll tax holiday. Tax credits for this and that. It will likely be more of the same we have seen before. Throwing a lot of money around that we don't have.

We don't need good intentions. We need jobs. What we have been doing is not working. Why would we want to travel that road of good intentions again? We should be traveling the road to results.