America: Where Are Your Workers?
The American job market is the strongest it has been in nearly 15 years and has continued its incredibly long recovery since the global financial crisis occurred nearly a decade ago.
Currently, we are in what economists refer to as “full employment,” where the economy has an unemployment rate around 4%, specifically 4.1% as of February 2018.
The data is very encouraging and a stark contrast from how bleak the economic data was in the wake of the financial crisis of 2008–2009.
There have been reports lately, however, of companies having a very hard time finding the right skilled talent for a lot of positions. How could this be possible in a full employment economy?
Full employment encompasses the highest amount of skilled and unskilled labor that can be employed within an economy at any given time. Any remaining unemployment is considered to be frictional, structural or voluntary.
In the current economic cycle, it may be just plain oversupply of labor. With enterprises reportedly hoarding record amounts of cash, they are able to deploy growth in various departments. If skilled and unskilled labor are at optimum efficiency, then that labor is tied up with that respective employer and should they leave, that void will quickly be filled.
Another reason for why companies are having a hard time finding talent? Missing workers.
This is the more sobering reason and a dark underbelly to the United States’ remarkable recovery since 2009.
In June 2017, the Economic Policy Institute, an independent and nonprofit economic research think-tank, conducted an analysis of America’s missing workers highlighting the fact that the unemployment rate as defined the way it is today does not depict the entire story. Throughout 2017 and 2018, the unemployment rate has held steady in the low 4% range. However, the institute highlighted an important fact that there are at least 1.5 million individuals who are not in the labor market.
In economics, participation in the labor market is measured in being unemployed and actively seeking out work. As of June 2017, the unemployment rate stood at 4.4% but factoring in the “missing worker population,” the rate would be at 5.2%.
Prior to the financial crisis, the labor market was in congruence between the actual unemployment and the economic definition for the unemployment rate. However, the unemployment rate (a lagging economic indicator) reached its peak following the Great Recession in the fall of 2010 for which the actual rate hit 11%.
Since then, as global economic conditions improved throughout the decade, the discrepancy between the two definitions of the unemployment rates have differed by 1–2%, indicating that millions are not actively participating in the labor force.
There’s also a more sobering reason for missing workers: opioids.
A recent study has noted the seriousness of the issue plaguing social classes across the spectrum, causing a notable difference in the unemployment rates.
Since unemployment following the crisis peaked in 2010, a recent study has noted a link in the rise of substance abuse during economic distress. A recent research publication by the National Bureau of Economic Research noted that when the unemployment rate for a given county increases by one percentage point, the opioid death rate per 100,000 rises by 0.19 (3.6%) and the opioid overdose emergency department visit rate per 100,000 increases by 0.95 (7.0%).
The US labor force participation rate has been cited as the lowest since 1978, meaning that millions of potential workers are systematically unemployed and one demographic has been disproportionately affected by opioid abuse — non-Hispanic whites. Researchers have not been able to point out why specifically this demographic has been susceptible to opioid abuse, but a few reasons to consider: lower-income earners across non-Hispanic whites have a harder time gaining education; lack of education could correlate to gaining new skills and training; lack of new skills and training for a more progressive labor market could lead to the inability to gain attention from organizations, which could cause feelings of hopelessness; when feelings of hopelessness arise it could cause a rise in substance abuse.
The publication by the National Bureau of Economic Research concluded a dark underbelly in the economic landscape since the beginning of the second decade in the 21st century: “Notwithstanding the possible pathways just described, we suspect that the dominant factor linking macroeconomic conditions to adverse drug outcomes is that the fatal and near fatal abuse of opioids often (and increasingly over time) reflects a physical manifestation of mental health problems that have long been known to rise during periods of economic decline…With the increased availability of prescription opioids (and reductions in heroin prices), it seems likely that the consumption of these drugs rises when economic conditions worsen and that some of this increased use leads to adverse outcomes including ED visits or death.”
As a society, combating the debilitating abuse of opioids and mental health must be addressed in efforts to work more towards a sustainable economic environment as we head towards the next decade.
With artificial intelligence becoming more of an economic and societal force, providing opportunities educationally and economically across various social classes must be a placed as a higher priority to bridge the skills divide.
Certain vocational schools and newer educational methodologies have been on the rise in innovative hubs such as Silicon Valley to address the affordability factor of formal education that affects middle-class and lower income communities. This is but a small step in addressing a rising societal issue and in addressing economic sustainability.