The labor market: Who is in and who is out?

Job seekers line up to apply during "Amazon Jobs Day" at the Fulfillment Center in Fall River

Job growth and a low unemployment rate of 4.3 percent would seem to provide a good backdrop for Labor Day, at least as wonks and economists measure such things. Other data, however, suggest a more complicated picture. While overall labor force participation has been declining since before the Great Recession, it has been declining for decades among prime-age men, particularly those with lower levels of education. As many others have noted, declaring whether the economy has reached full employment—generally meaning that anyone who wants a job can find one—is tricky (for example, see here, here, and here).

Assuming, however, that increased employment as well as decreased unemployment is the right target, my colleague Natalie Holmes and I sought to better understand the  who is on the sidelines of the labor market, including their interest and likelihood of (re)-entering the working world. We focused on adults ages 25-64, including the unemployed as well as those not actively looking for work, and then subtracted people engaged in alternate activities such as school and stay-at-home parenting (estimating the latter). We also subtracted people receiving disability or retirement benefits, on the grounds that they are much less likely than the general population to seek work. (If you’re interested, here is more information on how we defined this population.)

The resulting out-of-work population is a large and diverse group of people, with varying levels of education, earnings, and previous employment. They are disproportionately disadvantaged, with lower levels of education, limited English proficiency, higher levels of disability, and limited work experience. More than half (55 percent) have no more than a high school diploma and only about one-quarter worked in the past year. The median age is 44, and one-quarter are between the ages of 55-64, nearing retirement years.

Many of the out-of-work can and will find their way back into employment, and it’s very likely that some portion of this group truly does not want to work, or does not need to work to support themselves. But the figures nonetheless raise uncomfortable questions. Contradicting the traditional advice for success in the labor market—work hard and go to school—even those with strong work histories and moderate-to-high levels of education have found themselves sidelined. And at the federal level, resources to help people improve their skills and connect to employment are inadequate for the task. The U.S. spends less on active labor market policies as a share of GDP than most other OECD countries. Federal funds supporting workforce development are declining, funds for adult literacy and GED preparation have always been low, and efforts to assist workers impacted by trade have been less than robust.

And yet, good work happens every day across the country, funded by federal, state, local, and private dollars, to help people prepare for and find jobs. Research and practice provide ample guidance to build and improve programs, and there is no shortage of creativity to transform how public agencies, colleges, high schools, nonprofits, unions, and employers collaborate to knit the supply and demand sides of the labor market closer together. What is necessary is the boldness to go beyond incremental change.