Why are employers still having so much trouble finding workers?
To many observers, the reason is obvious: lots of workers who left the labor force during the covid onslaught haven’t come back. For whatever reason – fear, lifestyle change, childcare difficulties, accumulated pandemic unemployment payments, etc. – they remain “on the sidelines;” that is, out of the labor force.
Other observers find a different explanation no less obvious: “A lot of people just don’t want to work.”
Let’s address each in turn.
At first glance, labor force participation figures appear to support the “lots of workers are still on the sidelines” story.
To be clear, the labor force consists of the number of people who are either working or looking for work. The labor force participation rate is the percentage of a population that is in the labor force. The labor force participation rate for the U.S. as a whole is the percentage of the population age 16 years or older that is in the labor force.
In February 2020, the month before covid hit, the labor force participation rate for men age 16 years and older was 69.0 percent. It’s 68.1 percent now. The labor force participation rate for women age 16 and older in February 2020 was 57.9 percent. It’s 56.9 percent now.
The difference between a participation rate of 69.0 percent and 68.1 percent for men amounts to 1.1 million workers. The difference between a participation rate of 57.9 percent and 56.9 percent for women amounts to almost 1.4 million workers.
That’s 2.5 million workers – about 1.5 percent of the labor force – still “on the sidelines,” by that rough estimate.
The workers thought most likely to have opted for the “sidelines” during the pandemic are women age 20 years to 34 years. The labor force participation rate for women age 20 years to 34 years was 76.0 percent in February 2020. It’s 74.9 percent now. The difference amounts to 349,000 workers. Seems to fit the story line.
But take a close look at monthly labor force participation rates over the past ten years, rather than the past two, and the “lots of workers are still on the sidelines” story all but falls apart.
Labor force participation rates for men and women of almost every age group are higher now than at any time in the past ten years – except for the few months right before covid, particularly February 2020.
Consider again women age 20 years to 34 years. The labor force participation rates for women age 20 years to 34 years going back to 2018 are: 74.9 percent now, 76.0 percent in February 2020, 74.4 percent in February 2019 and 73.2 percent in February 2018.
64 percent of women in the labor force are 25 to 54 years old. The labor force participation rates for women age 25 years to 54 years going back to 2018 are: 76.8 percent now, 77.1 percent in February 2020, 76.0 percent in February 2019 and 75.4 percent in February 2018.
Lots of workers still “on the sidelines”? The numbers say no.
What’s buffeting labor markets in the U.S. today isn’t covid. It’s demographics. Since February 2018, while the country’s population age 16 years to 64 years has increased by 0.5 percent, its population age 65 years or older increased by 10.8 percent. That’s a 1,060,000 increase in 16 to 64 year olds and a 5,450,000 increase in people 65 years and older.
Which addresses the second explanation of why employers are still having trouble finding workers: “A lot of people just don’t want to work.”
Indeed, a lot of people don’t want to work. They’re retired.
Reg Murphy Center