“The more than 91 million Americans who are out of the workforce and stuck on the sidelines deserve action on the part of the president and the Senate.”
– Rep. Diane Black, R-Tenn., opinion article in The Tennessean, Jan. 28, 2014
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A confused reader wrote the Fact Checker about this sentence, wondering how it was possible that 91 million Americans could be unemployed.
Black’s assertion came in an opinion article that decried the decline in the worker participation rate. This previously obscure data point has seeped into Republican talking points as the more closely watched unemployment rate showed steady improvement in 2013. The official rate is now 6.7 percent, or about 10.3 million unemployed.
For instance, in the official Republican response to the State of the Union address, Rep. Cathy McMorris Rodgers, R-Wash., asserted, “Last month, more Americans stopped looking for a job than found one.”
And earlier in January, Rep. Lynn Jenkins, R-Kan., said at a news conference: “This Obama economy is holding people back. The workforce participation rate is the lowest that it’s been in 40 years.”
Black, in her article, even recalculated the unemployment rate to account for the decline in the workforce participation rate: “In fact, if the same percentage of people were in the labor force today as there were in 2009, our unemployment rate would be an astronomical 10.8 percent.”
The subtext is that President Barack Obama is to blame for this problem. Is that the case?
As of December, the Labor Department’s Bureau of Labor Statistics reports, 62.8 percent of Americans had a job or were actively seeking work. That’s the lowest level since March 1978 – nearly 36 years ago.
When Obama took office in January 2009, the workforce participation rate was 65.7 percent. So there has certainly been a decline. But the rate had already been on a steady downward track since it hit a high of 67.3 percent in the last year of Bill Clinton’s presidency.
A key reason? The composition of the labor force has been affected by the retirement of the leading edge of the baby-boom generation.
In the first five years of George W. Bush’s presidency, the rate fell 1.2 percentage points. Five years into Obama’s presidency, the rate has fallen 2.9 percentage points.
So clearly the decline has been faster under Obama, though again, demographics have played an important role.
The Federal Reserve Bank of Chicago in 2012 concluded that just over half of the post-1999 decline in the participation rate comes from the retirement of the baby boomers. Critically, the research showed that the problem is only going to get worse in the rest of the decade, with retirements accounting for two-thirds of the decline of the participation rate by 2020. In other words, the rate will keep declining, no matter how well the economy does.
Barclays economists, meanwhile, say that just 15 percent of the drop in the labor force stems from people who want a job and are of prime working age (25 to 54). “We view the possibility of a large and sudden return of previously discouraged job seekers to the labor force as remote,” they wrote.
Of course, this does not let Obama off the hook.
There are two key indicators that this is not just a demographic story. One, the number of Americans working or actively seeking work has actually fallen faster than demographers had predicted, and two, the participation rate for workers ages 16 to 54 fell sharply during the recession and hasn’t recovered. Some suspect that people are not entering the workforce at the same rate, in part because they are spending more time getting an education.
Now, let’s look closely at Black’s claim that there are “91 million Americans who are out of the workforce and stuck on the sidelines.”
The BLS does show that nearly 92 million Americans are out of the workforce. But dig into the numbers and it is clear that it’s silly to say all of these people are “on the sidelines” and need action from the president and the Congress.
BLS documents show that the civilian noninstitutional population – essentially, people over the age of 16 – is nearly 247 million. The civil labor force is 155 million, with a participation rate of 62.8 percent.
So that leaves nearly 92 million “not in the labor force.” What is that counting?
Essentially, it means everyone above the age of 16 who is not working. The BLS breaks it down even further, and it quickly becomes clear that the vast majority of these people are retired or simply are not interested in working.
6 million want a job now but cannot find one.
2.4 million did not actively search for work.
1.5 million did not search for work because they are students or left the job market for family reasons, illness or some other factor.
900,000 are discouraged and think no job is available.
Add that up, along with the 10.3 million who are unemployed but are still counted as part of the labor force, and then maybe you could say there are 21 million people who are “on the sidelines” of the job market. But the other 80 million people have permanently left the work force.
Tom Flanagin, press secretary for Black, said that “we certainly did not mean to mislead, as the piece was written from beginning to end from the standpoint of labor force participation, not the total number of unemployed.” He added that “our point being in this piece that today’s unemployment rate is misleading as it is not reflective of a broader problem in today’s economy, which is that so many people have given up looking for work.”
Republicans need to be careful with the way they use statistics on the workforce participation rate. Lawmakers must begin to acknowledge that other factors, beyond Obama’s control, are playing an important role in the decline.
Black’s assertion takes this line of attack to an absurd conclusion. She may have not intended to mislead, but she certainly did so by using the 91 million figure in a wholly inappropriate manner. She cannot with a straight face argue that all of those people want a job; in fact, the vast majority are simply retired.