The real face of unemployment and underemployment

Justin Haskins Heartland Institute
Published February 28, 2015

Brian Perry is a college-educated law clerk who worked at the Providence, Rhode Island-based Lovett, Scheffrin, and Harnett law firm for more than 25 years before being laid off in 2008. Since then, Perry has relentlessly searched for quality work, but he’s been unable to find anything stable. With minimal income, no solid job leads, and costs beyond what he could manage, Perry was forced to sell his home a few weeks ago.

“The sad thing is that many American families, especially here in Rhode Island, are worse off than I am,” Perry said in an interview.

Former professionals over the age of 40 are often not portrayed as the face of modern unemployment in the United States by many in the media. Americans hear a lot about recent college graduates who can’t find good jobs and about the unemployment rate in the African-American community topping 10 percent, but there isn’t a lot of talk about well-qualified job-seekers like Perry who have decades of work experience but can’t find any meaningful employment.

“But the unemployment rate has been dropping recently,” you’re undoubtedly thinking.

It’s true the unemployment rate for workers 40 and older (as well as for everyone else) has been dropping since 2010, but these figures are incredibly misleading. The primary reason for the drop is not better employment opportunities but rather is the result of millions of workers choosing to leave the labor force.

Most Americans still don’t realize it, but the government does not count people who have given up looking for work as “unemployed.” Additionally, workers who are forced to settle for far less hours and less pay are also considered “employed.” This is why one of the best ways to gauge the state of the economy is to look at the labor force participation rate instead of the unemployment rate, and an unbiased analysis of the data proves the economy is still in rough shape, regardless of what President Barack Obama says about the so-called “economic recovery.”

The Bureau of Labor Statistics (BLS) reports that the number of workers not in the labor force aged 45 and older was 39.3 million in 1985. By 2005, that number rose to 48.8 million. This was largely due to an increased number of Baby Boomers retiring, not a poor economy. But what took 20 years to occur in the past has occurred again during Obama’s relatively short time in office.

Since 2009, the number of people 45 and older not in the labor force grew by 9 million, and the national total in January topped 60 million, the highest figure ever recorded for that month. This is undoubtedly the result of many older Americans giving up looking for work or choosing to retire early because of a poor economy.

Some critics argue using the labor force participation rate as a gauge of the economic climate is foolish because it fails to distinguish between Americans who are no longer working because they can’t find employment and Americans who are choosing to retire because they are wealthy enough to do so.

It’s true that many Baby Boomers are just now retiring, but this cannot possibly account for the remarkable numbers mentioned above. From January 2005 to January 2009, a period when many Baby Boomers were also retiring, the number of people not in the labor force increased by roughly 2 million. This is an average increase of about 500,000 people per year. The average increase under the Obama administration has been greater than 1.5 million per year, three times that of the second half of George W. Bush’s presidency. If an aging nation is the reason for the changing workforce, the averages mentioned above should be much closer together.

My argument is buttressed by a 2013 study by Merrill Lynch and Age Wave that found nearly one-quarter of all people who retire do so because of unemployment, nearly the same number of respondents who said they retired because of financial security.

Obama and many Democrats say the economy is getting better. “Tonight, after a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999,” Obama said during his January State of the Union address. “Our unemployment rate is now lower than it was before the financial crisis. More of our kids are graduating than ever before. More of our people are insured than ever before.”

Debbie Wasserman Schultz, the chair of the Democratic National Committee, said, “[There’s no] question the economic issues are an advantage for Democrats,” prior to her party getting walloped in the November 2014 elections.

In February 2014, former Rhode Island Democratic Gov. Lincoln Chaffee said his administration in Rhode Island created jobs and helped improve the state’s economy.

Brian Perry and millions of other Americans across the country aren’t buying it.

“I don’t think things have improved much since 2008,” Perry said. “Taxes are forcing the young and old out of their homes in this state. Rhode Island politicians and politicians in Washington, DC should realize families and businesses can’t grow in this kind of business environment. If these politicians lower taxes, more families and businesses will develop and grow. … A smart business owner would never come into this kind of situation.”

Perry is right. Unemployment figures offer nothing more than political theater. Further, the narrative that most demographics are enjoying a booming economy and only small, isolated pockets of people are still struggling just isn’t true. The economic climate as a whole is lagging, and many groups popularly thought to be “doing fine” are still limping along just like everyone else.

The current state of the economy is not solely the result of Obama’s policies. He inherited a massive financial crisis – a point the president loves to remind the nation every chance he gets. But at some point, the crisis Obama inherited became his own responsibility, as well as the responsibility of every state and local government in the nation.

Rather than hide behind manipulated employment data, politicians need to start honestly examining their failing economic policies and come up with reasonable solutions to fix them that don’t involve trillions of dollars of debt and a bankrupt nation.

“Lower taxes, eliminate unnecessary regulations, empower entrepreneurs. It’s not rocket science,” Perry said, proving once again why we need working-class Americans in government.

[Originally published on Human Events]