Falling Off the Talent Cliff: The Failing US Jobs Machine

Abstract

© 2014 Wiley Periodicals, Inc. Published online in Wiley Online Library (wileyonlinelibrary.com). DOI 10.1002/ert.21427 The September 6, 2013, Bureau of Labor Statistics (BLS) “Employment Situation Report” for August raised an ominous red flag. Unemployment fell to 7.3 percent, but only because a record number of US workers (516,000) gave up looking for work and left the labor force.1 August was the fortieth consecutive month in which more unemployed workers left the US labor market than found jobs.2 Defying modern history, the percentage of the population either working or looking for work has been declining even during this so-called economic expansion. This percentage is termed the labor-participation rate. It essentially measures the share of workers who find it rewarding enough to look for or obtain a job. This labor-participation rate has dropped to its lowest point in 35 years—63.2 percent! It was in 1978 during the Carter administration that this same low figure was last recorded.3 (See Exhibit 1.) Much of this decline has been driven by a growing skills-job mismatch. Nearly a million US workers say they have given up looking for work because they don’t believe they can find a job, and many millions more say they want to work but aren’t actually searching because government benefits are more than what they can earn in a low-paying job. Yet it is growing ever clearer that all the money the Federal Reserve has poured into the bond market through Q.E. 1, 2, and 3 (i.e., quantitative easing) has failed to jolt the US labor market back to life. This monetary/ fiscal formula based on a cyclical economic analysis has ignored the underlying structural failure in the US education-to-employment system. We now need to face the possibility that the pool of over 30 million unemployed or underemployed in the United States will grow much larger over the remainder of this decade.