Posted by: Josh Lehner | September 9, 2021

Report: Oregon’s Latent Labor Force

Oregon’s long-run economic and revenue outlook is closely tied to the state’s population forecast. The more Oregonians, particularly working-age Oregonians, the more income earned and taxes paid. Plus a larger population increases demand for new housing construction, additional pizza parlors, and the like which generates even more economic activity. However, the state does not necessarily have to experience faster population growth to see stronger economic and revenue gains. The main reason is there are already plenty of Oregonians today who are underutilized. Businesses have a wealth of potential employees, if they are able to or willing to hire from disadvantaged populations that have traditionally been excluded from the economy to a greater degree. In our office’s previous forecast we discussed how there are historical inequities built into what economists generally define as full employment (see PDF pg 18 here).

A new report titled “Reimagining Full Employment” from the Roosevelt Institute examines what the economy could look like if some of these historical inequities were addressed in the United States. Building off the major themes of the Roosevelt Institute’s work, our office developed a few Oregon-specific scenarios. What follows is a high level summary of that work.

Specifically, what would Oregon’s long-run labor supply look like if we closed the educational attainment gap between white, non-Hispanic Oregonians and communities of color? How many more workers could local businesses hire if employment rates across all segments of the population were at their historical maximum? What if women were hired at the same rate as men? All three of these potential scenarios address a specific labor market inequity, and in doing so would boost the overall potential of Oregon’s economy, including sales for local businesses and the associated taxes paid to fund public services.

Note: These scenarios and analysis is built off of potential changes seen across different cohorts of Oregonians over the next decade. Specifically these cohorts are grouped by sex (male and female), educational attainment (college graduates and non-college graduates), race or ethnicity (white, non-Hispanic, and Black, Indigenous, and People of Color), and eight different age groups (16-24, 25-34, 35-44, 45-54, 55-64, 65-74, 75-84, 85+). There are 64 cohorts in total. The scenarios also account for the increasing diversity among Oregonians, a trend expected to continue in the years ahead.

The upshot of addressing these employment disparities is Oregon, is that they have the potential to boost the labor supply much more than any realistic increase in migration ever could. By hiring to a greater degree from Oregon’s existing residents, firms would be able to tap into a much larger pool of labor in order to expand and grow. Such an outcome would be a win-win for society and the economy.

The table below summarizes the findings of these three potential scenarios. The first set of numbers indicate how much larger labor supply would be, above and beyond our office’s baseline outlook, if a particular disparity is addressed. The final number converts this into a population growth rate equivalent. Over the decade ahead, our office expects Oregon’s population to increase by 0.8 percent per year. Every increase of a tenth of a percent is a massive change in the number of potential workers in the regional economy.

The single largest inequity is the gender gap. Women are employed at lower rates than men, and earn lower wages as well. Increasing employment opportunities for half the population (women) really moves the overall economic needle. This is easier said than done, of course. In particular the largest gender gap in terms of employment is seen between moms and dads. To really address this disparity, the availability and affordability of childcare and extended care after school would really need to be addressed. The unemployment rate between women and men is not noticeably different, but that’s largely due to many moms indicating they are not looking for work specifically because they are taking care of the home or family. Flexible schedules, working from home, and broader societal changes are also likely needed to help address the gender employment gap. Ultimately if women in Oregon were employed at the same rate as their male counterparts across each cohort, Oregon’s labor supply would be more than 150,000 larger than forecasted in the decade ahead. This boost would be equivalent to seeing population growth per year of 1.3 percent instead of the baseline of 0.8 percent. In other words, migration into Oregon in the decade ahead would need to be 60 percent above our office’s forecast to generate an equal boost to the labor supply as would raising female employment rates among existing Oregonians.

The scenario with the second largest boost to Oregon’s labor supply really boils down to employing individuals at the highest rates experienced in recent decades when examining each cohort based on age, sex and educational attainment. For example, if all women of the same age and educational attainment were hired at similar rates, how much larger would Oregon’s labor supply be? These are not either/or scenarios. They simply show how large the latent labor force is even within similar groups of workers. All told, this scenario would boost Oregon’s labor force by more than 80,000 workers in the decade ahead. This is equivalent to seeing population growth per year of 1.1 percent instead of the baseline of 0.8 percent. Put another way, migration into Oregon in the decade ahead would need to be 33 percent above our office’s forecast to generate an equal boost to the labor supply.

The third scenario modeled here eliminates the educational attainment gap between white, non-Hispanic Oregonians and their Black, Indigenous, and People of Color peers. This scenario only closes the college graduate gap among the youngest age cohorts and not for the entire population. From a policy perspective it would be more likely to target higher college enrollments among recent high school graduates than it would be to send middle-age and older Oregonians back to college campuses.

Note that while raising educational attainment and closing the gap does boost Oregon’s potential labor force by the equivalent of about one-tenth of a percentage point of population growth a year — a noticeably boost — such changes are relatively small compared to the other two scenarios. The reason is twofold. First, the educational attainment gap is only closed for the youngest cohorts, leaving most of the labor force unchanged.

Second, the largest differences related to educational attainment are not employment-related, but income-related. Yes, employment rates are a bit higher for college graduates, but wages are considerably higher. The median wage for both white, and BIPOC college graduates in Oregon is about 80% higher than it is for non-college graduates of the same race or ethnicity. Therefore the biggest economic and societal boosts to raising educational attainment and addressing racial disparities will not be seen in the raw number of workers in Oregon. Rather, the bigger boosts will be seen in the income, poverty, homeowner, and taxes paid data.

Bottom Line: Addressing economic disparities raises the potential of the entire economy. Local businesses have a larger pool of workers to choose from than many believe due to the historical underutilization of many segments of the population. Faster migration in the years ahead will grow the economy, however even if stronger migration gains do not materialize, there remains considerable upside risk to Oregon’s economic and revenue growth.


Responses

  1. Specifically, what would Oregon’s long-run labor supply look like if we closed the educational attainment gap between white, non-Hispanic Oregonians and communities of color?

    Amen, nothing can break the intergenerational cycle of poverty more than the tool of education.

    However, African-American students are bottom of the heap when it comes to education and we do nothing about it.

    Well, I’ll take that back since I yelled at my Sen and Rep about SB744 – Now we don’t even test to get a diploma so the teacher’s union, erm, Legislature won’t have that finger pointed at them.

    As I explained, tests help determine student skill and who needs help – Or If you can’t measure it how do you manage it?

    And almost as important, it serves to measure a teacher, school, admin or districts efficacy as a learning institution. As I explained to my rep, if 10 classes take the exact same test and 9 classes avg 90 pts and one averages 60%, isn’t that worth investigating.

    Keep it up, you make me think (helps since I’m a product of public schools here) 🙂

  2. What about the educational attainment gap between women and men? Nationally, women have higher college enrollment than men. To what extent does this current disparity warrant measures to boost college enrollment of young men?

    https://www.wsj.com/articles/college-university-fall-higher-education-men-women-enrollment-admissions-back-to-school-11630948233?mod=searchresults_pos1&page=1

    “The number of men enrolled at two- and four-year colleges has fallen behind women by record levels, in a widening education gap across the U.S.”

    Appeared in the Sep 07, 2021 , print edition as ‘‘I Just Feel Lost.’ Young Men Abandon College’


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