In political debates, however, the opposite is the case. It's not unusual that important terms go undefined so that people in the audience will assume that both parties to a debate are speaking about the same thing when, in fact, they are not. That's why those politicans throw out statistics that allegedly "prove" their side in the debate, with both having "proven" the truth of opposites!
Today's term: labor force participation (LFP).
Definition: "a measure of the proportion of adults who are employed or actively seeking employment."
Given that definition, LFP appears to be relatively a straightforward concept. For example, a high LFP rate is a good thing, indicating that more work opportunities are available in the economy or that more people are willing to work.
However, a senior policy analyst at the Heritage Foundation, James Sherk, identifies a number of factors that influence the LFP rate:
- Age: Workers ages 25 to 54 are more likely to participate in the workforce, while older workers are more likely to leave the workforce and retire.
- Economic conditions: While adults may cease work for reasons apart from the nation's economic health, the LFP rate generally decreases when the economy is performing poorly, because workers--feeling defeated--give up looking for jobs.
- Disability benefits: Since the mid-1980s, Social Security Disability Insurance (SSDI) enrollment has steadily increased when President Reagan expanded eligibility for the program. Also, SSDI applications spike during economic recessions. Today, 6% of the adult population collects SSDI.
- Government assistance: Poorly designed welfare programs discourage recipients from seeking employment, as do subsidies.
- School enrollment: Since 2007, the percent of Americans enrolled in school has increased exponentially. In a weak job market, many students seek advanced degrees hoping they will have better job opportunities upon graduation.
Sherk notes that the nation's LFP rate began to decline in 2000 and sharply so after the 2008 recession. However, the majority of the LFP's decline before the recession was due to demographic changes. But, after the recession, those demographic changes account for only 25% of the LFP's decline.
So, what accounts for the other 75% of the LFP's drop after the recession?
Sherk points to increased enrollment in SSDI and school, both of which are Obama administration policies. Students pursuing degrees generally return to the labor market. But, in today's economy, many of those who are returning are underemployed and holding college loan debt. In contrast, those receiving SSDI benefits rarely return to work.
Knowing what words have meaning and what the term "LFP" means, be sure to listen carefully when politicians make grand pronouncements about the nation's LFP rate. Are those politicians "proving" their point or playing footloose and fancy free with the data?
Let the discussion begin...
To read James Sherk's discussion of the LFP, click on the following link:
"Not Looking for Work: Labor Force Participation and Opportunity."