Thursday, December 4, 2014

What Happens When 100 Million Americans Are Not In The Labor Force?

More pressure is being added on the one-third of working Americans supporting two-thirds of the population

It is hard to believe but we have over 92 million Americans not in the labor force.  I’ve paid close attention as to how the media presents this group and they usually attribute it to older Americans retiring.  The problem with this narrative is that it gives the impression that many have the means to retire and also, that many of these are older people.  That is not true.  Many older Americans are dropping out and fully relying on Social Security so they do not fall into a life of financial destitute.  Many others including younger workers are oscillating in and out of the low wage economy.  This entire shadow group which is getting close to one-third of our nation is largely discounted in the media.  The unemployment rate looks fantastic because every month, we have more Americans simply being erased off the financial ledger.  At this current rate, we will have 100 million Americans not in the labor force by 2020.
The race to 100 million
Whenever I tell people that one-third of working Americans are supporting two-thirds of the country they find the figure hard to believe and full of hyperbole.  Unfortunately this is the reality of the current situation.  We can break down the figures and get a better perspective.  Math is math after all.
Here is the population broken down:
Source:  Jobenomics, BLS
What you have is 108 million private sector employees kicking in revenues to support the entire US population of 319 million.  Now some are clearly not in the labor force for obvious reasons like children or Americans with health issues.  But much of the growth that has recently occurred has been because of the poor performance of the economy.
We have added 12 million Americans to this “not in the labor force” category only in the last few years:
not in labor force
You will see that the recent recession has accelerated this movement beyond your regular population growth:
population growth and not in labor force
This is where the main issue is.  The rate of growth for those not in the labor force is growing faster than the actual population.  We find these issues hitting younger Americans as they now find themselves supporting many more Americans, including many that now rely on Social Security and Medicare as their main sources of retirement support.
What brought this all on?  It was our lost decade in job creation:
Even though we have been adding jobs since the Great Recession ended many good paying jobs that were lost are now being replaced by low wage employment in the service sector.  It was interesting to see so much of the holiday marketing come in with a pitch to buying more goods with debt.  Companies know Americans are tapped out but the economy runs on consumption.  So more debt it is.
At this rate, we will have 100 million Americans not in the labor force by 2020.  This is going to have a big impact on social services and the way our economy runs.  Of course this story is going to be buried deep into the wonky economic pages but this is a very important matter.