Posted by: Josh Lehner | January 18, 2018

3 Places the Labor Will Come From

Given that the labor market will remain tight, and the immense response to the New York Times article recapped yesterday, Bloomberg columnist Conor Sen asked:

This is speculative, but I think there are three sources of potential workers that aren’t really being talking about: people with self-reported disabilities, stay-at-home moms, and young adults.

Let’s start first with people with self-reported disabilities (physical and/or cognitive). Over the past 20-30 years there has been a massive increase in the share of prime working-age adults citing illness or disability as the reason they are not working, or looking for a job. This increase is approximately 3 percentage points of the prime-age population nationwide and 4 percentage points in Oregon. However, as detailed previously, there has not been a corresponding increase in Social Security Disability Insurance, nor a big increase in households reporting disability income. This difference is puzzling.

We previously put forth a few hypotheses to explain the gap, including the possibility of a genuine public health crisis or broader social acceptance of pain. However we also discussed individuals may be trying to save face when answering the question of why they are not working. For example, instead of saying companies would not hire them, they said they had a bad back, otherwise they would work. These can be difficult issues to discuss, particularly with strangers. This hypothesis is one way to help square the differences seen in the data. It can also now be tested as the labor market is tight. Will we see a cyclical decline among this seemingly structural trend?

As luck would have it, economist Ernie Tedeschi was digging into this the other day. (I highly recommend following Ernie on Twitter as he seems to always be conducting fascinating research using microdata.) His latest work shows that individuals who previously cited illness or disability are now flowing back into the labor force in greater numbers. Not a huge increase yet, but some movement in that direction. Furthermore, Ernie also finds that some of those previously citing disability are now switching their responses to other options like school enrollment, or taking care of the kids, etc as the reason for not working. All of this is very interesting and well worth monitoring moving forward. If, somehow, a quarter of the increase in those prime-age Oregonians citing disability returned to the labor force that’s approximately 20,000 potential workers, or around 10 months of job growth. That’s a very big number.

The second group of potential workers are stay-at-home moms. Our office documented the increases seen since 2000 in our previous report. I’m sticking to moms here given that 1 in 5 are not working specifically to stay home and take care of the kids while just 1 in 100 fathers are doing likewise here in Oregon.

As seen in the chart below, labor force participation rates are lower today among Oregon moms with elementary school-age kids or younger. The big unknown, however, is just how much of these trends are economic related, versus societal shifts or simply personal or family preferences. Elementary school students today were all born at the peak of the housing bubble, during the Great Recession or in its immediate aftermath. Job opportunities barely existed for anyone looking, including new moms. It’s possible that todays middle school and high school students were born long enough ago that their moms were able to stay in or enter the labor market under better economic conditions.

High childcare costs, especially in Oregon, and possibly family leave practices may explain the differences seen in mothers of newborns and pre-schoolers. But what about the trends seen among moms of elementary school-age children? This decline of 10-15 percentage points in participation is equal to approximately 20,000 Oregon moms today. Their educational attainment breakdown is 45% high school or less, 22% associate’s or some college, and 34% bachelor’s degree or higher. Clearly, stay-at-home moms are another large pool of potential workers worth watching moving forward.

The third potential source of workers are likely to be young adults — teenagers and college-age kids. As discussed back at Thanksgiving when I begged you to be nice to your nephew, labor force participation rates among this population have fallen around 15 percentage points. However there was a corresponding increase in school enrollment. To the extent that falling participation rates reflect a weak economy where the broken jobs ladder meant there were fewer opportunities for young adults, then we should expect some reversal of these trends in a strong economy. If we do see a reversal, that means it will likely come out of enrollment in higher education.

We’re already seeing this to some degree, however in a strong economy the share of 18-24 year olds enrolled in college likely has more room to decline. Should it return to mid-2000s rates, that’s another 20,000 potential workers as well. Whether or not this would be a good development is an open question. As our office has said previously, the silver lining to fewer young adults working today is that they are learning additional skills in school they can bring to the labor market tomorrow.

Enrollment declines are seen throughout the nation in recent years. Oregon community college enrollments are back to where they were a decade ago. 4 year universities are generally seeing flat to falling enrollments as well. There are a few exceptions, like both Oregon State’s main Corvallis campus and it’s Cascade campus in Bend.

Bottom Line: The labor market will remain tight until the next recession. This is due to the strong economy, which is approaching full employment, but also due to demographics as the Baby Boomer retirements are rising. Likely candidates to boost the labor force include those citing disability as the reason they were not looking for a job, stay-at-home moms, and young adults foregoing higher education. Overall, a tight labor market is pulling more workers back in. We should hope these gains continue as a tight labor market works wonders, even if it does not cure all ills.


Responses

  1. […] Source: 3 Places the Labor Will Come From | Oregon Office of Economic Analysis […]

  2. […] a largely untapped labor pool for businesses looking to hire and expand. (Another place the labor will come from will be young adults more broadly, as higher ed enrollments, particularly among two year programs, […]

  3. […] One of those commonly cited supply constraints is the lack of workers. Something along the lines that the economy could build more housing units if firms could find the workers. Our office’s position is that yes, it is harder to find workers today than in the recent past, however from a high vantage point it does not appear to be particularly bad in construction relative to the overall economy. For example, the share of prime working-age Oregonians with a job is back to where it was prior to the Great Recession, if not a little above that. It’s harder for all businesses to find and attract workers in a relatively tight labor market. As an aside, that is one reason why we’ve also dug into some potential labor supply sources. […]

  4. […] to find workers that may have been previously passed over. This includes searching in places where participation is down but likely to respond in a strong economy. Employers may also downskill some positions by having fewer skill and/or work […]


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