Dan Walters: California's workforce takes a dive
05/05/2013 12:00 AM
05/05/2013 8:43 AM
Reader beware: We're about to delve into numbers – big, abstract numbers, but immensely important numbers as well.
Each month, state and federal governments release the latest employment statistics and everyone zeroes in on the unemployment rate as an economic benchmark.
That rate, however, is derived from two numbers – the "labor force" of potential workers and the number who are jobless.
The most recent report for California was for March; it said there were 18.6 million Californians in the labor force, with 1.75 million unemployed, for a jobless rate of 9.4 percent.
The rate is affected by both numbers. If the number of employed Californians remains unchanged, for instance, but the labor force declines, the unemployment rate also falls.
And that brings us to the "labor force participation rate," meaning the percentage of those over the age of 16 who are either working or available for work.
Nationally, that rate has declined sharply in the last decade from 66.3 percent to 63.3 percent, the lowest level since 1979, according to the U.S. Bureau of Labor Statistics. State-level data indicate that California has followed the national trend almost exactly and also has a participation rate of about 63 percent.
Why the decline? A sluggish employment picture is one reason. Some discouraged job-seekers simply drop out of the labor force. Younger ones may go back to school, while older ones may take early retirement.
There's been a sharp increase in Social Security disability claims by those not old enough to qualify for regular Social Security benefits. Some adults have segued into the underground economy. Inner cities teem with young high school dropouts who just hang around.
One impact of the declining participation rate is to make California's unemployment rate, although still one of the nation's highest, look rosier than it otherwise would be.
The difference between a 66 percent rate and a 63 percent rate – three percentage points – translates into 900,000 potential workers, and were they still part of the labor force, it would mean California's unemployment rate would be more than 13 percent, instead of the current official rate of 9.4 percent.
Working off the same data for the nation, the Wall Street Journal said that the U.S. jobless rate would be 11.4 percent, rather than the official 7.6 percent.
Does any of this matter?
Indeed, it does. The state's economic health – and ultimately its social health and its governmental finances – depend on having as many able-bodied adults as possible working, supporting their families, buying goods and services, and paying taxes, rather than consuming benefits.
Having an ever-declining segment of the able-bodied adult population working, or at least seeking work, has corrosive, long-term effects.
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