This page has been archived and commenting is disabled.

Labor Force Participation Crisis? Don't Blame Demographics!

Tyler Durden's picture





 

The Labor Force Participation Rate - in English, the percent of the population that is either in a job or looking for a job - fell yesterday to fresh 35 year lows. This is not a new trend, in fact since the end of 1999 (the dot-com bust) it has trended lower from well over 67% to the current 63.2%; which means the current unemployment rate would be over 11% if the labor force was at its last three decade average. There appear to be at least four reasons (excuses) put forth for this dismal 'structural' trend but chief among them - and propagandized by most in the mainstream (given its lack of 'blame') - is the so-called 'aging of America' or demographics. There is only one problem with that 'myth'; it's entirely inconsistent with other Western economies who are experiencing exactly the same demographic shift. The collapse in the US labor force is, in fact, due to excess credit having fueled artificial growth for 2 decades; and now a government throwing free money at the population in the form of disability insurance (which has surged) and student loans (which are exponentially exploded). So who (or what) is to blame for the US' collapsing workforce? Simple, the unintended consequences of government interference.

So what is to blame for America's collapsing workforce?

1. The Aging Of America: Demographics - NO!

Some claim that one big reason for the decline of the participation rate is the long-run demographic trend of now-retiring Boomers. However, this is just not supported by any facts. Compared to Canada, a nation similar in many respects to the US, the demographics - as represented by the following population pyramid are almost exactly the same...

So what explains this...

... the massive divergence in USA's and Canada's labor force participation rate?

In other words, NO, it is not the aging of America that is driving the collapse of the working population in the USA... so what is it?

2. More Potential Workers Are Going On Disability - YES!

As we have explained previously,

The tremendous increase in people on SSDI is nothing but a gigantic fraud, perpetuated by the Federal government and slimy lawyers. The government broadened the scope of disabilities to include stress, depression, and non-diagnosable things like aches and pains.

In fact, rather stunningly, the number of people on SSDI now exceeds the entire population of Greece.

In 1968 there were 51 workers for every person on disability. Today there are 13 workers for every person on disability.

and the application rate for SSDI is surging...

Sadly, as we noted here, it is now 'more economical' to not work that work for the lower incomes:

we merely explained what has become the painful reality in America: for increasingly more it is now more lucrative - in the form of actual disposable income - to sit, do nothing, and collect various welfare entitlements, than to work. This is graphically, and very painfully confirmed, in the below chart from Gary Alexander, Secretary of Public Welfare, Commonwealth of Pennsylvania (a state best known for its broke capital Harrisburg). As quantified, and explained by Alexander, "the single mom is better off earnings gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045."

 

 

We realize that this is a painful topic in a country in which the issue of welfare benefits, and cutting (or not) the spending side of the fiscal cliff, have become the two most sensitive social topics. Alas, none of that changes the matrix of incentives for most Americans who find themselves in a comparable situation: either being on the left side of minimum US wage, and relying on benefits, or move to the right side at far greater personal investment of work, and energy, and... have the same disposable income at the end of the day.

 

3. More Potential Workers Are Staying In School - YES!

Despite stock markets at record highs (or perhaps because of as we noted previously and is evident in the chart below)...

The US economy remains stagnant at best and 'in recession' at worst and this is forcing millions of young people to prefer the safety of a government-funded student loan-driven 'educational system' to hide in as opposed to test the waters in the jobs market. As we pointed out previously,

Anecdotally, it appears the Millennial generation is still operating on the fantasy that all they need to do to get a secure, good-paying job and a happy life is go to college and enter the Status Quo machine of government/corporate America.

 

There are two fatal flaws in this fantasy: the $1+ trillion student loan industry and a transforming economy. The higher education industry in the U.S. operates as a central state-enabled and funded cartel, limiting supply while demand (based on the fantasy that a college degree has critical value) soars.

Since the Federal government issues and guarantees all student loans, the higher education cartel is (like sickcare, national defense and the mortgage industry) effectively socialized, i.e. funded and managed by the central state.

 

As Charles Hugh-Smith noted previously,

If you understand the student loan system is predatory, parasitic and exploitive, you have reached first base of a meaningful political awareness. If you understand the central state (Federal government) funds and enforces this system, you've reached second base. If you understand the vast majority of college degrees do little to prepare you to be productively employed in the real economy, you have reached third base.

 

If you understand the Status Quo is unsustainable and does not operate according the the fantasy model you've been told, congratulations, you're close to home base.

 

4. "Growth" Since The 80s Has Been Credit-Fueled and Artifical And Now We Unwind - YES!

As we noted yesterday, 'something' changed around the start of the 80s when economic growth diverged from labor. Coincidentally, US debt also began its exponential rise around that time and fueled 30 years of Keynes-inspired artifice - that is now seen for what is was...


 

and in fact, as David Stockman previously wrote in detail here,

No, last week’s jobs report was not “strong”. It was just another edition of the “born again” jobs scam that has been fueling the illusion of recovery during the entire post-crisis Bernanke Bubble. In short, the US economy is failing and the welfare state safety net is exploding. And that means that the true headwind in front of the allegedly “cheap” stock market is an insuperable fiscal crisis that will bring steadily higher taxes, lower spending and a gale-force of permanent anti-Keynesian austerity in the GDP accounts. And for that reason, the Fed’s strategy of printing money until the jobs market has returned to effective “full employment” is completely lunatic. The bottom-line is that Bernanke is printing money so that Uncle Sam can keep massively borrowing, and thereby fund a simulacrum of job growth in the HES Complex. Call it the Bed Pan Economy. When it finally crashes, Ben Bernanke will be more reviled than Herbert Hoover. And deservedly so.

Indeed, we have been losing private sector breadwinner jobs at the rate of 31,000 per months for thirteen and one-half years running, and as Stockman further explains:

Yet the Keynesian money printers who inhabit the Eccles Building insist that the problem is cyclical and that just a few more months of lunatic bond-buying will bring the labor market back to full employment health.

If the Cramer noise machine had a “sell” button, it would be screaming at the top of its lungs.

So in conclusion:

The key message from the charts above seems to be that 'none of it was real' and now it is time to pay the piper as the Fed has reached a point of inept omniscience and cornered itself and fiscal policy can only be 'helped' by moar war...

Or as we have written in the past:

At some point, the Millennial generation will have to awaken to the fact that the only way to change its fate is to grasp political power and redirect the policy and mindset of the nation. Centralization is the black hole that is destroying the nation's social and economic vigor. Decentralization, transparency, accountability, adaptability, social innovation, a community-based economy--these are the key features of a sustainable social order.

 

The existing social and financial order is crumbling because it is unsustainable on multiple levels. The Status Quo will cling to its false promises and corrupt centers of power until the moment the whole thing implodes.

 


- advertisements -

Do NOT follow this link or you will be banned from the site!