Helping Americans get back to work

Overview

It’s a tough time for American workers.  Over the past few decades, millions of Americans lost their jobs due to big shifts in the U.S. economy and a devastating financial crisis.  And many are still in a rough spot.  Only 63% of people who are old enough and healthy enough to be working actually have jobs – the lowest rate of labor force participation in almost 40 years.

Jobs Board

The consequences of our unemployment crisis are widespread, ranging from financial stress to anxiety to hopelessness.

It’s time to address this crisis head on – because America is a country where everyone who wants a job and is willing to look for one should be able to find one.

  • The economy crashed in 2007, and the job market still hasn’t recovered

    One of the most devastating consequences of the Great Recession the U.S. experienced from 2007-2009 was its impact on employment.  In total, the financial crisis caused about 8.7 million people to lose their jobs.  

    The job market has certainly improved in the years since the Recession.  But it remains severely scarred.  

     The job market is severely scarred.

    Today, many remain out of the labor force.  US News and World report said in June 2016, “…the total number of Americans not counted in the labor force – some of whom are retired or in school, but others of whom likely have given up on trying to land a job – climbed by more than 660,000 last month to roughly 94.7 million.”

  • The rate of people with jobs is alarmingly low

    Since the early 2000s, the percent of people in the labor force has fallen to 63%, the lowest level since the late 1970s.  See below from the Bureau of Labor Statistics:

    Screen Shot 2016-08-24 at 10.09.34 PM

  • The situation is especially bad for men of working age

    A whopping 12% of men of “prime working age” (age 25-54) aren’t in the labor force.  That’s 7 million people who in theory would be working but are not.

    There are a few scenarios in which this theoretically might not be a bad thing.. for example if these men were deciding not to get official jobs because they were spending time on other productive activities like taking care of their kids or learning new skills.

    But, as discussed in detail in a recent report from the White House Council of Economic Advisors, that’s not the case.  According to the report: “Nearly 36 percent of prime-age men not in the labor force lived in poverty in 2014—casting doubt on the hypothesis that nonparticipation represents a choice enabled by other personal means or income sources.”

    As shown below in a chart from the White House report, this decline has been occurring for decades:

    Screen Shot 2016-08-24 at 10.11.50 PM

    Nick Eberstadt, an economist at the American Institute, commented on this trend in the Wall Street Journal:

    “This is arguably a crisis, but it is hardly ever discussed in the public square. Received wisdom holds that the U.S. is at or near “full employment.” Most readers have probably heard this, perhaps from the vice chairman of the Federal Reserve, who said in a speech last week that “it is a remarkable, and perhaps underappreciated, achievement that the economy has returned to near-full employment in a relatively short time after the Great Recession.”

    Near-full employment? In 2015 the work rate (the ratio of employment to population) for American males age 25 to 54 was 84.4%. That’s slightly lower than it had been in 1940, 86.4%, at the tail end of the Great Depression.”

  • Being unemployed for long stretches makes it harder and harder to find a job again

    Another troubling issue is how long many Americans are having to sit out of the workforce.  About 2 million individuals are among the long-term unemployed – meaning they have been unemployed for more than 27 weeks.  

    AEI scholar Michael Strain addresses many of the downsides to long-term unemployment in an interview with journalist Brad Plumer.  The big problems?  Anxiety and stress for people who want to work but can’t find a job – and a troubling cycle wherein the longer someone is out of work, the harder it is for them to get hired.  

    See more below:

    BP: This might be belaboring the obvious, but what are the main reasons why people should worry about this?

    MS: First of all, just at a basic level, work is very important and a well-functioning labor market is very important — not only for the economic benefits of working. But if you have a bunch of people who want to work and can’t, that’s a lot of potential that’s sitting on the sidelines, and it’s bad for economic efficiency. Also, if people aren’t working, they’re more reliant on government welfare, taxes are higher.

    And more important are the basic human issues. People derive so much of their identity and of their moral core from being able to work. It’s how people provide for their families, express creativity, gives you a sense of purpose. There are all these moral and spiritual and psychological benefits to working. So if you want to ask how society is doing broadly, certainly the economics are important, but more important is whether this society is functioning in a way that people can live the fullest life possible and can maximize their potential. And right now, for these 4 million folks, we’re failing.

    BP: The other part of this argument is that long-term unemployment isn’t like regular employment. If you’re out of work for a long time, it actually becomes harder to get a job after awhile. What’s the evidence on this score?

    MS: There’s the survey evidence, you can just ask businesses, if you have two candidates and one’s been unemployed for four weeks, and one’s been unemployed for 30, who would you hire? I think there’s a limit to what you can learn from acting.

    There have also been résumé studies that have been really good, where people create fake résumés and send out pairs of résumés where the only difference is the length that each person has been employed. And sure enough, the longer a person’s been unemployed, the smaller the probability that people get called for an interview. So there’s some compelling evidence that “scarring” is actually happening.

  • Help unemployed Americans go back to school and to develop new skills

    There’s been a big shift in the economy from manufacturing to information and services.  According to Business Insider, "job openings are hitting all-time highs in the US but are not leading to a

    US companies are taking an incredibly long time to fill positions

    comparable number of people being hired for new jobs.  US companies are also taking longer on average to fill positions than at any other time in the nation's history."

    One way to help?  By making it easier for unemployed Americans to go back to school and learn new skills.

    Certainly addressing the current college tuition and student loan problem is one way to decrease barriers that make it tough to get more schooling.  Another promising solution is the growth in competency-based, flexible college classes and programs like the "Flexible Option" offered by the University of Wisconsin.

  • Encourage companies to hire people who have been unemployed for a long time

    AEI's Michael Strain highlights in National Affairs a solution to help people who have been out of work for a long period of time get hired.

    One obstacle the long-term unemployed face when looking for a new job is employers viewing them as a riskier hire if they don't have up-to-date skills or experience.  Strain identifies a potential solution: allowing companies to initially pay people who have been unemployed for a long period of time a lower minimum wage.

    Allowing companies to pay slightly lower wages to people who have been unemployed for a while would make it far easier for them to get hired and ultimately return to their full earning power.

    This would lessen the perceived risk for employers while at the same time making it easier for people to get back into work, earn a paycheck, and obtain valuable on-the-job experience. This approach is already law for the youngest workers, people receiving tips, the disabled, and some college students.

    Click here to read Michael Strain's "A New Jobs Agenda for the Right" in National Affairs.

  • Provide flexibility for cash-strapped employers to help keep more Americans working

    Today, employers that become strapped for cash due to a slowdown in business or an economic recession are often forced to lay off workers whose salaries and  benefits they can no longer afford to pay.   The company might prefer to keep employees working, but have no other option because they just don’t have enough money.

    Expanding worksharing would help reduce layoffs.

    AEI's Michael Strain proposes one way to address this challenge: expanding "worksharing" options and reforming the unemployment compensation system. Worksharing gives employers more flexibility in managing their labor force, rather than using the blunt tool of layoffs.

    Employees who see their hours worked reduced under the program would be eligible for partial unemployment benefits. Fewer people would be laid off, fewer skills would be lost, and firms would be able to ramp up hours more quickly than if they had to re-hire workers.

  • Michael R. Strain
    AEI scholar helping invent creative ways to get the American people back to work

    Image uploaded from iOS

    “...More important is whether this society is functioning in a way that people can live the fullest life possible and ...

    “...More important is whether this society is functioning in a way that people can live the fullest life possible and can maximize their potential”
    Why They Matter

    From his AEI bio:

    Michael R. Strain is director of economic policy studies and a resident scholar at the American Enterprise Institute. His research interests include labor economics, applied microeconomics, public finance, and social policy.

    Dr. Strain’s research has been published in peer-reviewed academic journals and in the policy journals Tax Notes and National Affairs, and he has edited two books on economics and economic policy. He also writes frequently for ...

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  • Marco Rubio
    U.S. Senator ringing the alarm bells on the job crisis

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    "Here's the best way to raise wages: Make America the best place in the world to start a ...

    "Here's the best way to raise wages: Make America the best place in the world to start a business or expand an existing business."
    Why They Matter

    Marco Rubio tells his story in his Senate bio:

    I started as a City Commissioner for West Miami before being elected to the Florida House of Representatives in 2000, and then Speaker in November 2006. Before taking this post, I authored the book 100 Innovative Ideas for Florida’s Future, which was based on conversations I had with Floridians at “idearaisers” that my colleagues and I hosted around the state. As Speaker, I helped enact many of the ideas in this book.

    <...

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