Monday, August 10, 2015

Worker Participation Rate Falls to 37-Year Low in July

The conservative media (specifically Breitbart and CNS) are reporting that labor participation rates are at a 38 year low:
A record 93,770,000 Americans were not in the American labor force last month, and the labor force participation rate remained at 62.6 percent, exactly where it was in June -- a 38-year low, the Labor Department reported on Friday. 
In 1975, when the Bureau of Labor Statistics began keeping such records, 58,627,000 Americans were not in the labor force...
Rather than just take their word for it, let's look at the trend over time. Here’s what that looks like in a graph (BLS data):

So, yes, the trend is rather unmistakably upward.

The number of people not in the labor force is calculated by comparing  the number of people working to the total population over the age of 16.

I prefer to use numbers that aren’t seasonally adjusted, so in the NSA numbers, the total number of people not in the labor force in July 2015 was 92,349,000 (slightly different from the CNS number).
So, as the population has increased, the number of people who are working has gotten smaller. Taken as a percentage, it looks like this:

As of July 2015, the labor force participation rate was 63.2 percent. Again, these are not seasonally adjusted. But, just a quick look at the graph tells us that we have to go back to the late 1970s to find similar labor force participation rates.

Obviously, there are seasonal cycles in employment, so for the sake of making sound comparisons, we should only compare July’s numbers to previous July numbers, though, so if we look back at the same month in previous years, we find that we have to go back to July 1977 to find a comparable rate. Specifically, in July 1977, the labor participation rate was 63.4 percent.

So the CNS article is more or less correct. Labor participation is at a 37 or 38 year low, depending on how you look at it.

But what does this mean for the economy? Part of the decline in the labor is simply attributable to the increased number of retirees in the economy. The Chicago Fed claims that “just under half”of the decline in the work force since 1999 can be attributable to demographic trends such as retiring baby boomers. Fair enough. But what about the rest?

That’s where discouraged workers come in, who have given up looking for work. The ranks of discouraged workers should also include people who retired earlier than they would have had they been able to hold onto their jobs after 2009. Other phenomena driving an exodus from the work force will be people going back to school in an attempt to get a better job, and also people who used to be wage earners in a two-income household, but now have concluded that wages are no longer high enough to justify the opportunity cost of working. These people may have quit work to offset costs such as child care, which is only worth it if your wages come in well above the cost of daycare.
When we consider all of this, there’s good reason to suspect that the job market really is quite lackluster. If wage growth were performing well, people would be enticed back into the labor force, and the participation rate would rise.

Now, one could make the argument that fewer people need to work because, perhaps, wages are going up. After all, if worker productivity (and thus wages) are going up, then households will not need as many wage earners to maintain an acceptable (to them) standard of living. Theoretically, if the economy were really humming along due to increases in worker productivity, we would also see people leaving the workforce.

But that’s unlikely in the current economy, because if we look at real hourly compensation (which reflects productivity), we don’t see much reason to believe that productivity and wages are going up:

Real compensation has really gone nowhere since 2006, so there’s little reason to believe that people are leaving wage work behind because they don’t need it anymore. (This is portrayed as an index with base year of 2009, so if all recent values are around 100, then we know that there's been little movement.) If we look at the percent change, year over year, we see that real wage growth is about where it was during the early 1980s, which is certainly nothing to get excited about. The overall trend seems to point toward more of a clustering around a zero-percent rate of growth in compensation during the past decade:

The falling labor participation rate is often mentioned with the assumption that declining labor participation proves that the economy is withering. This is not necessarily true, given that automation can increase worker productivity and thus reduce the need to work as much to achieve what the workers deems to be an acceptable standard of living. Indeed, many urban workers today work fewer hours than urban workers 80 or 90 years ago, and have a much higher standard of living. Also, increases in the labor force during the 70s were partially driven by women entering the labor force in large numbers.

But, looking at the past thirty years and at current wage data, we can guess that people are leaving the work force now, not because they are so satisfied with their standard of living, but because they are discouraged workers, have retired earlier than they might have, have gone back to school, or have just resigned themselves and their household to a lower standard of living. The falling number of workers belies that continued claim in the media and by government press releases that things are getting better and better, and that with just a little more patience, happy days will be here again.
Moreover, with a declining work force and flat wages, who's going to finance all those Social Security and Medicare payments that are paid out relentlessly to an increasing retiree population, but financed by a shrinking workforce?

Mini Book Review: Bourgeois Frontier by Jay Gitlin

Several years ago, I wrote a short article called "Speak English, or Else" (also "Back When America Was Multilingual") which examined the true complexity and variety of linguistic traditions in the United States. The idea that English was, until recently, the so-called "dominant" language in the United States, greatly oversimplifies matters. As an example (among others), I looked at Colorado's original state constitution from 1876 which stipulated that the constitution (and all new laws) be distributed in English, Spanish, and German "to supply that portion of the inhabitants of the State who speak those languages and who may be unable to read and understand the English language."

Then as now, Spanish speakers were common in Southern Colorado, and German speakers were common, especially in the northeastern part of the state. 

And while French was never spoken outside a small minority in Colorado, the Francophone world was also important in Colorado, especially in the world of trade and commerce.  

This forgotten world of Francophone traders, property owners, and settlers is examined in some detail in Jay Gitlin's new book Bourgeois Frontier: French Towns, French Traders, and American Expansion

Most readers unfamiliar with this period in history will assume that Gitlin is writing primarily  on the period before the so-called "French and Indian War" which ended in 1763. And of course, that is a reasonable assumption since we have long been taught that the French ceased to be important on the American frontier after the 1760s. 

But the groundbreaking work that Gitlin is doing here helps to open up new knowledge of how French families and a Francophone culture continued to serve many important roles on the frontier well into the 1830s and 1840s. 

The French in the Trans-Mississippi West

Richard White and others have done some new work on examining the role of the French settlers in the Great Lakes area, but Gitlin's work is the first I've ever seen that takes a detailed look at the French on the Great Plains and the Southwest after the Louisiana Purchase in 1803. 

Much of the misunderstanding about the French role in the region stems from the long-standing Anglo chauvinism that portrayed Anglo settlement as the only settlement that mattered, while downplaying the contributions of Hispanophone and Francophone settlers to the region. And of course, Indians are generally ignored as well. The arrival of the Anglos, we've long been told, was a sort of  "end of history" situation in which all other groups merely paved the way for the final and "correct" stage of settlement, which was the Anglo and Protestant phase. Much of this narrative is handed down from Frederick Jackson Turner's vision of the Frontier, and much of it was formed along the lines of old anti-Catholic narratives which assumed the Spaniards and Frenchmen, being Catholics, must have been lazy, passive, and authoritarian. The explicit anti-Catholicism has long disappeared, but the general image of the non-Anglo settlers remains. 

The truth, of course, is something else entirely. The French settlers, Gitlin tells us, had already put a commercial infrastructure in place long before the Anglos had arrived. It was the towns, forts, villages, supply lines, and commercial trading patters of the trans-Mississippi West that opened up the region for later settlers and which set settlement patters for generations to come. 

Moreover, the French had much more complex, friendly, and fruitful relationships with the Indians than the Anglos did, and these relationships were key in putting together treaties, and negotiating commercial relationships with the Indian tribes. 

In these relationships, Gitlin reminds us, the French employed a different settlement pattern than the Anglos. While the Anglos represented wholesale conquest of lands and a state of apartheid with the Indians, the French frequently intermarried with Indians, producing many  mixed families, in which extended French families and Indian tribes were both commercially and culturally intertwined. Unlike the Anglos, who relied on expropriating large amounts of agricultural lands, the French functioned more on an urban merchant model, relying much more on moving goods through towns and trading posts, than on producing agricultural goods themselves. 

Thus, the old French families became urban institutions that relied on trade, negotiation, and private property, rather than on the Anglo model of large-scale seizure of Indian lands, military domination, and total replacement of the existing frontier culture. 

(In this, some readers might be tempted to think of the "Ostseidlung" settlement in Eastern Europe, in which the Germans moved into Eastern Europe. The Germans also employed a non-Anglo model based largely on life in urban centers and management of trade lines, rather than expropriating the local inhabitants and taking their lands.) 

For their divergence from the quasi-religious Anglo model of creating a new and ethnically pure promised land on the frontier, the French were denounced as collaborators with the Indians, as traitors, and as (even worse) as retrograde Papists who needed to be purged. 

In spite of all of this, however, Gitlin reminds us, the French settlers tended to be economically, successful, politically influential, and excellent and making the best of the new political and economic realities of the frontier.

The French in the Rocky Mountain West 

Those (like myself) with a particular interest in Colorado history will be especially drawn to chapter five, "Beyond Saint Louis" which examines the role of the French along the Santa Fe Trail which was a major trade route sunning through southeastern Colorado, and which was partially dominated by Bent's Fort on the Arkansas River east of what is now Pueblo, Colorado. 

The Bent family is well known for its close connections to local Hispanophone and Indian settlements. Gitlin, however, adds in a new French dimension, noting the close alliance between French patriarch Ceran St. Vrain and Charles Bent. Both the St. Vrain and Bent families worked together managing trade from New Mexico and Colorado and back to Saint Louis which was the center of Francophone world in the American west. 

Other French families, such as the Robidoux family, were active even deeper into the Colorado frontier, being instrumental in the founding of Fort Uncompahgre on the Gunnison River, and also with trade lines running from fort Laramie in Wyoming and south to Santa Fe and Taos. 

Culturally, this world of Spanish, French, and Anglo merchants was complex and multifaceted with frequent intermarriage between the French families, Spanish families, Anglos families, and Indian tribes. William Bent, for example, is known for his marriage to the Cheyenne Princess Owl Woman, and Kit Carson's first two wives were Indians. He later converted to Catholicism and married Josefa Jaramillo who was the sister of Maria Jaramillo, the common-law wife of Charles Bent. 

Members of the Bent and Jaramillo families were famously murdered in an uprising in New Mexico exacerbated by the American war against Mexico in the 1840s, but connected to all of this was the Beaubien family which was an important and influential family in New Mexico under both the Mexican and American regimes. The French families, Gitlin frequently reminds the reader, were marked by family loyalty and economic ties and not by loyalty to any particular nation state. The ability of the French networks to move seamlessly between Spanish, French, British, and American spheres was a notable reason for their economic success in a time of frequent political change. 

Gitlin explores this multicultural world with an eye to the economic and political infrastructure it formed well before large numbers of Anglos ever began homesteading wheat farms on the high plains in the late 19th century. Private property, negotiation, family connections, and civil society, Gitlin contends, were far more central to the Francophone world than to the Anglophone world which was marked more by military conquest and state-imposed settlement patterns and economic patterns. 

Bourgeois Frontier is a short book (only 190 pages, not including notes and bibliography), and it is easy reading for readers who are already familiar with the basic historical outline of frontier history. Novices in frontier history may find the historical narrative more difficult to follow, but anyone interested in understanding the history of the American frontier beyond the usual tropes and simplifications will find much to enjoy here.