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Posted at 4:52 PM ET, 02/ 9/2011

What happens to the unemployed, in one graph

By Ezra Klein

If you ask people how an unemployed person stops being unemployed, they'll probably say that the person gets a job. But that's not the only answer: A person can stop being counted as unemployed if she gives up looking for a job. That's the worst of all worlds, of course. Giving up on working when you want a job is bad for income, for skills, and even for health and happiness. But as this graph from Mike Konczal shows, it's become increasingly common:

leaving_unemployment_1.jpg

By Ezra Klein  | February 9, 2011; 4:52 PM ET
 
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Comments

I'll agree that in this case it's probably bad that people are leaving the workforce, because it seems likely they're leaving because they discouraged. But it's not always the "worst of all worlds" - some people leave the workforce because they're going to school to improve their skills, some people leave the workforce because they're taking early retirement which might allow them to pursue non-work interests that are more fulfilling than their day-job (although they may have to cut back on some expenses).

I'm curious how people who are trying to get a start-up are categorized? If they have no customers but they are working on developing a product or service, are they counted as in the work force? And are people writing a screenplay or novel they hope to sell counted as in the workforce? I assume yes but some of those people would look unemployed to me.

Posted by: tysonsahib | February 9, 2011 5:25 PM | Report abuse

Ezra, any idea how many of those "leaving the workforce" are from (formerly) two-income households? It might be a bumpy transition, but if the notion that both parents have to work lost some support, would that necessarily be a bad thing?

Posted by: notabbott | February 9, 2011 6:02 PM | Report abuse

Um, isn't the red line lower than in 2007?

Posted by: theo2709 | February 9, 2011 10:54 PM | Report abuse

@theo270 Um, isn't the red line lower than in 2007?

Yes, but as a percentage of a MUCH lower unemployment rate in 2007. This is just a further indictment of Obama and the Democrats -- who began at 7.7% unemployment and have been at or over 9% for almost two years.

By contrast, in a far worse recession, Reagan tax cute BEGAN over 10% unemployment, which peaked 21 months later.

Two simple conclusions. Reagan REVERSED 10% unemployment. Obama CREATED it. And unless unemployment peaked last fall, Obama cannot possibly catch up.

And Reagan didn't blow nearly a trillion dollars on the same "stimulus" notion that was discredited 70 years ago.

Plus, watch that number that Ezra shared with us. As and if jobs pickup, the now-discouraged job seekers come back into the job market keeping the unemployment rate high.


Posted by: LibertyIssues | February 10, 2011 7:05 AM | Report abuse

Hi Ezra,

You seem to be making the assumption that everyone who leaves the workforce is doing so involuntarily (hence it being a bad thing).

However, 2010 was when the first tranche of male boomers retired, the first spike after WWII.. Z conseu

Posted by: Thegreasypole | February 10, 2011 7:58 AM | Report abuse

Hi Ezra,

You seem to be making the assumption that everyone who leaves the workforce is doing so involuntarily (hence it being a bad thing).

However, 2010 was when the first tranche of male boomers retired, the first spike after WWII.. Z conseu

Posted by: Thegreasypole | February 10, 2011 7:58 AM | Report abuse

Hi Ezra,

You seem to be making the assumption that everyone who leaves the workforce is doing so involuntarily (hence it being a bad thing).

However, 2010 was when the first tranche of male boomers retired, the first spike after WWII consequently I'd expect a large part of these labour force reductions to have been normal retirements. I'd expect another additional number of students remaining in school/college linger too. Is there any data that may allow us to adjust here for the lower labour force you would expect from the first boomer retirements/extended schooling ?

If boomer retirement explain the bulk of this it's not necessarily a bad thing. A quick google reveals that we'd expect approx. 2.5m more retirements in 2010 and 2011 over 2009 (given the rbirth spike was of approx 5m per year)

Posted by: Thegreasypole | February 10, 2011 8:07 AM | Report abuse

Arrgh,

Sorry about the multiple posts, posting from an iPhone leaves a lot to be desired.

I did some more digging. The 4% gap in people leaving unemployment via leaving the labour force between 2009-2011 comes to approx. 600,000 people.

Between 45-46 there were an additional 553,000 live births. Assuming half were male (and they all survived to retirement, and none retired early.... poor assumptions I know) that would explain approx. half of the people leaving the labour force merely through scheduled retirement(276,000).

I also looked up school/college enrolment ratios but could only find figures for 2009. 94.6% of 16-17 year olds enrolled, 68.9% of 18-19 yo's and 51.7% of 20-21 yo's.

There were roughly 8m in each cohort. Assuming enrolment went up just0.5% in the first group, 1% in the 2nd and 3rd groups (again another assumption, but I can't find stats to give proper numbers here) that might explain approx. another 200,000 people who are not in the labour force.

I think there is clearly great scope in these figures for the additional gap in labour force participation to be explained NOT as "your average worker who got so discouraged he didn't look" so much as "more people reaching retirement" and "more kids staying in school than normal". Neither of which are as "bad" an event as the assumption the article seemed to make.

I also strongly suspect, but have no figures on, the remainder being heavily comprised of people laid off very near retirement. If these people were of the type "I want to work that extra year or two, I need the money. Now I've got no chance" then they fit within Ezra's assumption of this being an unambiguosuly bad thing. However, I suspect a good proportion of these may be early retirements of the "You know what marjorie ? We were discussing me retiring early and hadn't made up our minds, but now I've been laid off 1 year early with this severance package why shouldn't we move to florida 1 year early" types.

I guess thats unquanitifiable.... but in so far as they probably make up some of this number I don't think there withdrawl from the labour force would be as unambiguously bad as the original article implied.

This is all rather embarrasingly amateur sleuthing on my part. Is there any chance Ezra or another pro might revist this post with some more professional analysis that might look closer into who and how these people withdrawing from the labour force are ?

It may well turn out that far from being a necessarily bad thing..... it turns out to be a demographic change....plus a good thing (kids increasing future earning potential)... plus some measure of voluntary early retirement that is causing this noticed change not necessarily "active workers being forced out strongly against thier wishes" as implied.

Posted by: Thegreasypole | February 10, 2011 9:06 AM | Report abuse

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