Unemployment rate masks the real story of lost workers

In July, Michigan’s unemployment rate dipped to 3.7%, the state’s lowest unemployment rate since 2000. Given the economic hardship our state endured for more than 10 years, let’s acknowledge and celebrate that.

Now for the bad news: while the unemployment rate tells us that a higher percent of people who are looking for work are finding it, the labor force participation rate tells us that a lower percent of the population are working or looking for work.

More bad news: Michigan’s 2016 workforce was still 326,000 workers short of what it was in 2000. The state has not gotten back even half of the nearly half-million workers that Michigan lost between 2000 and 2012.

As this year’s Labor Day Report shows, Michigan’s workforce is graying: the share of the labor force that is age 55 or older has nearly doubled, from 11.6% of the total workforce in 2000 to 22.2% in 2016. Yet retirements don’t explain the loss of workers, because a higher percentage of Michigan residents in that age group are working than in 2000.

LDR Labor force 55+

On the contrary, it is the population age 16-24 that is less likely to work than before. The labor force participation rate of 16-24-year-olds was at 72% in 2000 (consistent with the previous two decades), dipped alarmingly to 55% by 2011 and 2012, and had risen to only 63.4% by 2016. The nonparticipation of younger Michigan residents in the workforce is a major factor in both the state’s lower labor participation rate and in the inability to replace the workers lost since 2000.

LDR Labor force by age group 450x407Much of this reflects national trends. Teenagers and young adults are not entering the labor force in the proportions that they used to, and the Bureau of Labor Statistics cites as possible reasons stagnant wages and competition for low-wage jobs by older unskilled workers due to the loss of higher paying jobs. The lower participation rate is true for both the population that is in school (secondary or postsecondary) and the population that is not in school.

As a state, we must address this situation. Immigration is one way for some of the lost workers to be replaced, and Governor Snyder has made it clear that Michigan is a welcoming state for immigrants. Immigrants arriving with higher skills can fill some job vacancies immediately, while those with lower skills often raise their children to become educated and skilled at a higher level than they themselves are.

For the young people already in our state who come from households with low incomes, Michigan should seek out ways to provide more access to training that leads to career-path employment—not just four-year college degrees, but “middle skills credentials” such as licenses, certificates and associate degrees. Michigan should also seek out ways to help participants in such training succeed by addressing barriers such as child care, transportation and the need for basic skills remediation.
Michigan may be rebounding, but it is obvious we still have a ways to go.

— Peter Ruark