Report: Michigan’s unemployment rate masks staggering loss of workers, aging workforce

For Immediate Release
September 4, 2017

Contact:
Alex Rossman
arossman@mlpp.org
517.487.5436

Since 2000, Michigan has lost 326,000 workers, seen labor participation rate go up for older workers, down for younger workers

LANSING—Since 2000, Michigan’s labor force has lost 326,000 workers, driven largely by a drop in workers 16-24 years old, according to the 2017 Labor Day report released today by the Michigan League for Public Policy. The report shows that while Michigan’s monthly unemployment rate dropped to 3.7 percent for July—the lowest jobless rate since 2000—this decline can be attributed as much to worker attrition as economic improvement.

Workers drop out of a state’s labor force in several ways: physically leaving the state, death, institutionalization (i.e., incarceration), or stopping both work and the search for work (i.e., retirement, disability, staying home with children, etc.). Michigan’s labor force reached its numerical peak of 5.16 million in 2000 and was down to under 4.84 million for 2016, showing a net loss of 326,000 workers.

“How Michigan’s economy is doing depends on which worker or policymaker you talk to and what data you look at,” said Gilda Z. Jacobs, president and CEO of the Michigan League for Public Policy. “Michigan’s declining unemployment rate is certainly good news, but it doesn’t tell the whole story. Since the unemployment rate was last this low in 2000, Michigan has been steadily losing workers, and our workforce is getting older, neither of which bodes well for our economic future.”

Michigan’s labor force participation rate, which measures the percent of the civilian population 16 years old and over that is working or looking for work, has been at a historic low for several years. Its high-water mark was 69 percent in 2000, but fell to a low of 60 percent in 2011 and 2012, where it has hovered since, despite the improving unemployment rate. In the same way, while Michigan’s employment-population ratio shows clear improvement since 2011 concurrent with falling unemployment, it is below where it was during the economically difficult years of the early and mid-2000s and the 20 years prior.

Michigan’s labor force has also begun to shift toward older workers. From 1979 (the earliest year data on worker ages is available) to 2000, the share of Michigan’s labor force that was 55 years of age or older was between 10-13 percent annually. Following 2000, however, this age group began comprising a steadily larger share of the workforce, and in 2016 their share (22.2 percent) nearly doubled that in 2000, while the portion in prime working age decreased from 70.4 percent to 62.3 percent over that span.

Younger workers, those from age 16-24, comprised a moderately smaller share of the workforce in 2016 (15.4 percent) than in 2000 (17.9 percent) but considerably smaller than in 1979, when they accounted for more than a quarter of the workforce. In keeping with the pattern of the previous 20 years, 72 percent of residents aged 16-24 were either working or looking for work in 2000. That percentage took a sharp and steady plunge over the following decade, bottoming out near 50 percent in 2011 sitting at 63 percent for 2016.

“We’ve all seen this data in action. Think about your daily life and the variety of workers you encounter in jobs that young people used to hold—a fast food worker, a grocery bagger, a restaurant server,” Jacobs said. “Lawmakers need to look at these changing demographics and embrace policies that help younger and older workers alike get the education, skills and training they need to get the jobs that they want.”

Although a higher portion of older individuals are remaining in the workforce, as they retire there are fewer younger workers to replace them. The League’s Labor Day Report offers the following policy recommendations for legislators to strengthen Michigan’s workforce at both ends of the age scale:

  • Make college education less expensive by lowering tuition and increasing financial aid, which will help cut down on student debt;
  • Encourage universities to offer more academically relevant work-study for students with low incomes so that they may gain meaningful work experience;
  • Make postsecondary training for “middle skills credentials” (a short-term or two-year credential such as a license, certificate or associate degree) more accessible to young people, especially those who live in areas with high unemployment and poverty and few available jobs;
  • Provide support services to young single mothers that encourage them to participate in postsecondary education or training and facilitate their completion and success; and
  • Retain Medicaid expansion in order to help provide healthcare for older workers earning lower wages.

To read the full Labor Day report and see labor force and jobless rate data for all 83 counties, go to www.mlpp.org/wp-content/uploads/2017/08/Labor-Day-Sept-2017.pdf.

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The Michigan League for Public Policy, www.mlpp.org, is a nonprofit policy institute focused on economic opportunity for all. It is the only state-level organization that addresses poverty in a comprehensive way.

Labor Day report: Michigan has lost 326,000 workers since 2000

pdficonPeter Ruark, Senior Policy Analyst
September 2017

THE LOST WORKERS

In July 2017, Michigan’s monthly unemployment rate dropped to 3.7%. This was the lowest jobless rate since 2000, the state’s best economic year in several decades according to most measures. While falling unemployment is certainly something to celebrate, using the unemployment rate alone to gauge Michigan’s economic recovery ignores important long-term trends in Michigan’s employment situation.

The unemployment rate is defined as the percent of the civilian labor force that is unemployed. Two other measures, when added to the unemployment rate, tell a more comprehensive story of the attrition of workers from Michigan’s job market: the labor force participation rate, which measures the percent of the civilian population 16 years old and over that is in the labor force (that is, working or looking for work), and the employment-population ratio, which measures the percent of the population that is actually employed (and will directly reflect the relationship between the unemployment rate and the labor force participation rate).

LDR fig 1Workers drop out of a state’s labor force in several ways: physically leaving the state, death, institutionalization (i.e., incarceration), or stopping both work and the search for work (i.e., retirement, disability, staying home with children, etc.). Michigan’s labor force, after nearly two decades of steadily climbing, reached its numerical peak of 5.16 million in 2000. During the severe economic downturn in the decade that followed, that number fell to as low as 4.7 million in 2011-12 and has risen slightly in the years since then. The size of Michigan’s labor force is now where it was in the mid-1990s, but well below its peak in 2000. In 2016,  Michigan had a net loss of 326,000 workers since 2000 (Figure 1).

LDR fig 2While changes in the actual size of the labor force tell a modest story, far more illuminating is Michigan’s labor force participation rate, which for several years has been at a historic low. As seen in Figure 2, even during the severe recession during the early 1980s when the state’s unemployment rate reached as high as 15%, the labor force participation rate remained steady at around 64% before gradually rising to a peak of nearly 69% in 2000. With the economic downturn of the 2000s, the rate fell to a low of 60% in 2011 and 2000. At 61.4% in 2016, it has not significantly moved since then despite the improving unemployment rate.

In the same way, while Michigan’s 2016 employment-population ratio shows clear improvement since 2011 concurrent with falling unemployment, it is below where it was during the economically difficult years of the early and mid-2000s and the 20 years prior. The unemployment rate tells us the short-term story that more people who are looking for work are finding it. It masks the longer-term story that a smaller share of people in the state are working or looking for work.

LDR fig 3Using Michigan’s peak employment year of 2000 as a baseline, we can measure the number of net “lost” workers against the number of currently unemployed workers in a given year. As mentioned earlier, Michigan in 2016 had 326,000 fewer workers in its labor force than in 2000, and these lost workers outnumbered the 238,000 unemployed workers that year. Between 2009 and 2011, a jaw-dropping 219,000 workers dropped out of Michigan’s labor force, and the number of lost workers has exceeded the number of currently unemployed workers in each year since then (Figure 3).

LDR fig 4In Michigan’s three largest counties, which comprise roughly one-third of the total state population, the net number of workers lost from the labor force since 2000 is considerably higher than the number of currently unemployed workers (Figure 4). And in the sparsely-populated Upper Peninsula, the workforce continues to shrink while the number of lost workers continues to rise LDR fig 5(Figure 5).

For a table of the unemployed and lost workers in each county in Michigan, please see the appendix.

MICHIGAN’S GRAYING LABOR FORCE

Not only has Michigan’s labor force shrunk over time, its composition has begun to shift toward older workers. From 1979 (the earliest year data on worker ages is available) to 1982, the share of Michigan’s labor force that was 55 years of age or older was between 12% and 13.2%, leveling out at 10-12% from 1983 to 2000. Following 2000, however, this age group began comprising a steadily larger share of the workforce, and in 2016 their share (22.2%) nearly doubled that in 2000, while the portion in prime working age decreased from 70.4% to 62.3%. Younger workers, those from age 16-24, comprised a moderately smaller share of the workforce in 2016 (15.4%) than in 2000 (17.9%) but considerably smaller than in 1979, when they accounted for more than a quarter of the workforce (Figure 6).

LDR fig 6To understand Michigan’s shrinking labor force and the shift in its composition, it is helpful to look at the labor force participation rate of each of the three age groups. In recent years, a larger percentage of Michigan residents 55 years and older are participating in the workforce than before. In 1995, participation by this age group was at its ebb (26%), but has risen fairly steadily since then and by 2016, nearly 37% of residents 55 and older were in the workforce either employed or looking for work (Figure 7). The lack of a “big dip” in the participation rate of older workers suggests that the decline in the labor force was not driven significantly by unemployed workers choosing to retire early.

LDR fig 7The higher labor force participation rate for workers 55 years old and over is likely driven by a number of reasons. According to one study, factors include: rule changes in Social Security and pensions that incentivize later retirement, improved longevity, higher levels of education, less physically demanding jobs and the decline of retiree health insurance.1

YOUNGER MICHIGAN RESIDENTS ARE NOT JOINING THE WORKFORCE AS BEFORE

A moderately smaller percentage of prime working-age residents are in the workforce compared to 2000, but the most significant change in labor force participation is with younger workers. In keeping with the pattern of the previous 20 years, 72% of residents aged 16-24 were either working or looking for work in 2000, but that percentage took a sharp and steady plunge over the following decade. By 2011, only a bit more than half of all 16-24-year-olds in Michigan were in the workforce. The percentage has gone up in fits and starts since then, but at 63% remains significantly lower than in any year prior to 2006.

It is quite telling to compare the younger workforce during the Great Recession of the late 2000s with that during previous recessions, particularly the deep recession of the early 1980s. While the employment-population ratio for young people in 1982 plunged to just under 51% and took several years to rebound, the labor force participation rate dipped only slightly (as reflected in the high unemployment rate during those years). The same was true in the milder recession of the early 1990s.

LDR fig 8In the years following 2000, the labor force participation rate for young workers began a startlingly different pattern from previous economic downturns. Not only did the employment-population ratio for young people go down steadily to record lows over the next decade, but so did the labor force participation rate, which fell from 72% in 2000 to 55% in 2011. That year saw a record low of only 45% of Michigan residents age 16-24 employed, and fewer than half employed during the six years from 2008 to 2013, yet the recorded unemployment rate for those years was considerably lower than in the early 1980s (16-19% compared to 21-26%) due to the very low workforce participation (Figure 8).

Michigan is not unique; the declining participation rate mirrors the trend for younger workers nationally. The Bureau of Labor Statistics reports that the age group with the largest decrease in labor force participation since 2000 is teenagers age 16-19, with white teenagers being the racial group with the largest decrease and Black teenagers with the smallest. Among teenagers, the most often cited reason for not working was school attendance. However, while teenagers not enrolled in school are generally more likely to participate in the labor force than those enrolled in school, the labor force participation rate of out-of-school teenagers also fell. The participation rate for adults age 20-24 has also fallen nationally since 2000, but less steeply than that of teenagers.2

For the portion of younger residents who are deferring entering the workforce due to enrolling in postsecondary education, it can be assumed that their foregone wages from not working now will be more than offset by higher wages after completing their education. Younger people not working, looking for work or going to school, on the other hand, are gaining neither educational credentials nor work experience that could help them in the job market. The cause for this lower labor participation rate among young people not in school is not clearly established, but according to the Bureau of Labor Statistics, could include a lack of desire to enter the workforce due to stagnant wages and to competition from low-skilled workers in other age groups.

POLICY SOLUTIONS FOR WORKERS OF ALL AGES

A significant factor, but not the only factor, in the shrinking of Michigan’s labor force is the lower likelihood of residents age 16-24 to participate in it, particularly those under 20. Although a higher portion of older individuals are remaining in the workforce, as they retire there are fewer younger workers to replace them.

The participation rate of younger workers remains low, but it is slowly rebounding. While there may not be easily identifiable policy strategies to encourage more young workers to enter the workforce, Michigan can undertake the following actions to help both younger individuals who are not yet in the workforce and older individuals who are choosing to stay employed at a later age:

  • Make college education less expensive by lowering tuition and increasing financial aid, which will help cut down on student debt;
  • Encourage universities to offer more academically relevant work-study for students with low incomes so that they may gain meaningful work experience;
  • Make postsecondary training for “middle skills credentials” (a short-term or two-year credential such as a license, certificate or associate degree) more accessible to young people, especially those who live in areas with high unemployment and poverty and few available jobs;
  • Provide support services to young single mothers that encourage them to participate in postsecondary education or training and facilitate their completion and success; and
  • Retain Medicaid expansion in order to help provide healthcare for older workers earning lower wages.

ENDNOTES

  1. Munnel, A.H., The Average Retirement Age—An Update, Center for Retirement Research at Boston College, March 2015. (http://crr.bc.edu/wp-content/uploads/2015/03/IB_15-4_508_rev.pdf, accessed on August 7, 2017)
  2. U.S. Department of Labor Bureau of Labor Statistics, Labor Force Participation: What Has Happened Since the Peak?, Monthly Review, September 2016. (https://www.bls.gov/opub/mlr/2016/article/labor-force-participation-what-has-happened-since-the-peak.htm, accessed on August 7, 2017.)

Despite recovery from recession hunger threatens Michigan’s health and economy

In the aftermath of the Great Recession, headlines have trumpeted the state’s recovery and inspired hope for a bright future filled with abundant jobs, comfortable incomes and a high quality of life for Michiganians. As the League’s new policy brief, Still Hungry: Economic Recovery Leaves Many Michiganians Without Enough To Eat, explains, what these headlines don’t capture is that the recovery hasn’t touched everyone in our state equally, and people at the lower end of the economic scale still struggle disproportionately with unemployment, underemployment and low wages. For many, income and employment gains have been insufficient to overcome rising food prices and other barriers to healthy food access. As a result, roughly 1.5 million Michiganians still don’t have enough to eat. This is not the time to downsize our anti-hunger efforts. Instead, we should preserve and expand existing programs that have proven effective and implement other reforms to ensure that all Michiganians have the fuel they need to lead healthy, productive lives and keep our state on an upward trajectory.

Still hungry blog graphic 1Certain people experience food insecurity and hunger more than others or are particularly vulnerable to the associated negative impacts. These residents and families who are struggling would be harmed disproportionately by proposals to restructure government nutrition programs and slash funding for other services that provide a basic standard of living for millions of Americans.

Households with children are less food secure than those without children. This is troubling because it’s difficult for hungry parents to support their families and raise healthy children, and nutrition is so important to children’s health and development, academic success and prospects for the future.

Seniors and people with disabilities often have increased nutritional and healthcare needs while also facing limited income opportunities and mobility challenges. This combination presents barriers to healthy food affordability and access.

In rural areas, poverty is often higher than average, full-service grocery stores may be rare and dental care providers may be scarce. Further hindered by a lack of public transit, rural residents may struggle with food availability, affordability and accessibility more than those living in urban and suburban areas.

A long history of public policy shaped by racism has left Black and Latino households at a broad disadvantage which leaves them particularly susceptible to the devastation that comes with a national economic crisis. As a result, food insecurity among households of color remains significantly higher than the peak level of food insecurity experienced by White households during the Great Recession.

Although some people are more affected by hunger than others, ultimately we all pay the price of food insecurity as the negative health impacts trigger a domino effect that burdens families, strains the healthcare system, harms the viability of our workforce and increases poverty.

The Supplemental Nutrition Assistance Program (SNAP), Supplemental Nutrition for Women, Infants, and Children (WIC), The Emergency Food Assistance Program (TEFAP) and a number of other federal services provide much of the funding that our state and local agencies and nonprofit organizations rely on to fight hunger in our communities. Other state and local initiatives involving government, nonprofit entities and the business community further fight hunger and boost the state’s agriculture and grocery industries.

These services help families achieve food security, keep people out of poverty, promote health and stimulate our economy. For these reasons, the League is pleased that Michigan’s 2018 budget includes funding for several healthy food access initiatives, such as $500,000 for the purchase of wireless equipment that will enable more farmers markets to accept Bridge Cards, support for Double Up Food Bucks to combat the effects of lead poisoning in Flint, and expansion of the 10 Cents a Meal program.

Still hungry blog graphic 7 reportThese resources, however, aren’t sufficient to serve everyone in need and address root causes of hunger, so society continues to incur billions of dollars in avoidable costs through poor health and a less dynamic workforce. Ensuring access to adequate healthy food presents one of the most cost-effective opportunities to strengthen our state’s greatest resource—its people—and promote our state and national prosperity.

— Julie Cassidy

Advocates tackle challenges facing U.P. kids

I recently had the pleasure of presenting before the Upper Peninsula Children’s Coalition in Marquette with several Great Start Collaboratives connecting via video conference. The annual event brings together many child advocates working on the ground to get updates on how kids in the U.P. are doing, and most importantly, for invited lawmakers to hear this information and make the connection to public policy changes that could improve the lives of children and their families.

During the nearly eight-hour drive, which was my first trip to Marquette and a very beautiful drive since the weather cooperated, it was so easy to see the many barriers that families in the U.P. face when trying to access anything—groceries, child care centers or the doctor, to name a few. When we think about families who may be experiencing additional barriers, such as housing, lack of transportation, unemployment and/or low wages, you can appreciate the need to improve how different service delivery and outreach is structured. (more…)

Unemployed workers falsely accused of fraud need more than just repayment

Imagine receiving a letter in the mail telling you that you committed Unemployment Insurance (UI) fraud several years ago and owed the government thousands of dollars in benefit repayments and penalties.

Beginning in 2013, workers who became unemployed began filing claims using Michigan’s new online unemployment system called the Michigan Integrated Data Automated System, or MiDAS. These workers did not expect to receive notices in the mail, in some cases long after they had found work and stopped receiving UI benefits, wrongly accusing them of fraud. The letters demanded thousands of dollars in repayment of their benefits plus large penalties, but did not provide information as to why the claimants were determined to have committed fraud. (more…)

The League’s top blogs of 2016

The League’s staff blog is one of my favorite communications tools. It is always current, as we aim to post at least one new blog a week, sometimes more. It is personal, as many of us share about our personal lives and experiences in connection with what we do at the League. The blog provides a variety of perspectives, as they are written by everyone from our CEO and board members to our interns and even former staff. And our blog strives to make public policy issues interesting and accessible.

A blog is only as effective as its reach, and what I love the most about our staff blog is that people actually read it and share it with others. So, as 2016 comes to a close, I wanted to take a look back at our most popular blogs of the year. Each of these blogs was shared over 100 times, showing that these issues struck a chord with our supporters. If you’ve already read these, I encourage you to take a look at them again. And if these are new to you, I hope you’ll give them a read.

  1. When are we going to really value education?: Michigan Kids Count Director Alicia Guevara Warren talks about Michigan’s disinvestment in education and how the state spends dramatically more on corrections than education.
  2. Why we fight: I wrote about the aftermath of the 2016 election and why policy advocates need to dust ourselves off and keep fighting the good fight.
  3. Angry about Flint? Be part of the solution: Policy analyst Peter Ruark writes about his volunteer work in Flint and the need for people to get involved on the ground and in the Capitol to help residents.
  4. Changing minds by touching hearts: League Vice President Karen Holcomb-Merrill blogs about the lives and hearts our work touches.
  5. Top ten voting tips: League CEO Gilda Jacobs writes about the importance of voting and dispels some prevalent myths around the process.
  6. Quit spreading misinformation: Michigan is NOT a high tax state: Legislative Director Rachel Richards seeks to set the record straight on Michigan’s tax climate.
  7. Bundle of joy: Gilda Jacobs discusses the birth of her new granddaughter and why we need a better Michigan and a better world for all kids.
  8. Michigan, 20 years after “welfare reform”: Peter Ruark blogs about the impact still being felt in Michigan today from the federal welfare reform of the 1990s.
  9. 14,000 unemployed workers will soon lose food assistance: Peter Ruark writes about a policy change that will take away vital food assistance for struggling workers.

—Alex Rossman

Minimum wage gets step-up but tipped workers still underpaid

MI minimum wageMinimum wage workers earned more this past week than they did in 2015, due to Michigan’s minimum wage increasing from $8.15 to $8.50 on January 1 of this year.

The increase is the third step in a legislated five-step increase that began in 2014. In 2018, minimum wage will increase to its final step, to $9.25. For years beyond 2018, the legislation requires that the minimum wage have an annual increase that is indexed to inflation. (more…)

Two generation policies offer support for parents and kids

On Monday, October 26th, the Michigan League for Public Policy held our annual meeting and public policy forum, “Secure Parents and Successful Kids.” We were joined by more than 250 people from around the state and a host of national and state experts and innovators in the fields of education, economic security and child well-being to discuss a two-generation approach to tackling poverty. (more…)

Michigan’s one-two punch against the unemployed

Eight of the nine states that cut the number of weeks that unemployed workers could receive Unemployment Insurance benefits, including Michigan, saw larger-than-average drops in the number of people collecting benefits after the cuts, according to a new report from the Economic Policy Institute. Despite high unemployment at the time, Michigan was the first state to legislate such a cut, from 26 weeks to 20. (more…)

Many kids stuck in poverty without solutions

Contact: Judy Putnam or Jane Zehnder-Merrell, 517.487.5436

Kids Count in Mich. ranks 82 counties on child well-being

LANSING, Mich. – Too many kids in Michigan remain mired in poverty at a time when policymakers have reduced help for struggling families, according to the Kids Count in Michigan Data Book 2015 released today.

Three measures of economic conditions worsened over the trend period with nearly one in every four children living in an impoverished household, a 35 percent increase in child poverty over six years. The trend period measured from 2006 to 2012 or 2013, depending on the availability of data.

(more…)

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