Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Combine this regulatory burden with the decline of entrepreneurship, and you get a bubbling brew that is toxic to self-employment/small business.
Why has the percentage of the population that’s in the work force declined so dramatically? It’s a question many have asked, and Gordon T. Long and I attempt to answer in our most recent video program The Participation Rate Mystery–Solved.
Why does the Participation Rate matter? Intuitively, we all understand that the lower the participation rate (i.e. the percentage of the population with a job or actively looking for a job), the greater the tax burden on the remaining workers.
We all understand that as the number of workers supporting each retiree declines, the remaining workers will have less income to support their own families, as the rising costs of retirees must be paid with higher taxes in our pay-as-you-go social and healthcare programs such as Social Security and Medicare /Medicaid.
Where there were once around eight workers for every retiree, now the ratio is down to 2.5 workers per retiree–and the cost of providing healthcare for the elderly has soared.
For context, let’s look at a few charts of the participation rate and related metrics. Let’s start with the engine of wealth creation–productivity. The productivity of industrialized nations’ work forces topped out in the cheap-oil boom years of the 1960s.
Not coincidentally, wages as a percentage of GDP (i.e. of all economic activity) topped out around the same time: 1970.
Here’s the participation rate going back to the 1950s. I’ve noted the key developments: the mass entry of women and the Baby Boom into the work force in the late 1960s-early 1970s; the peak of financialization and debt-based speculation in the 1990s through 2007; the advent of automation capable of eating not just low-skill jobs but middle-class jobs, and the diminishing return on further financialization/speculative bubbles.
In the big picture, while the economy added jobs, workers took home a diminishing share of the economy’s expansion.
The participation rate of those in their peak earning years 25-54 has declined to the levels of the early 1980s, before the financialization/tech booms took off.
The participation rate of women mirrors this long-term erosion.
The participation rate of men has been declining for 60 years. This parallels the decline of male-dominated sectors (factory floors, manual labor, etc.) and the relative rise of sectors such as education and healthcare that have been traditionally mainstays of employment for women.
But I propose a second factor–the massive decline in self-employment and entrepreneurship. This is not to say that women aren’t self-employed or entrepreneurs; it is merely to point out the correlation of male participation and self-employment.
Prior to the dominance of Corporate America and regulation-loving government, many men were self-employed in male-dominated sectors such as auto mechanics, construction, appliance repair, yard maintenance, etc.
Regulatory burdens, high taxes, high rents, competition from Corporate America franchises, etc. have made it increasingly difficult to be self-employed/open a small business for men and women alike.
But the rising burdens have impacted men to a greater degree, as many male-dominated sectors such as mechanics, construction, etc. were traditional strongholds of self-employed/small businesses. In comparison, the female-dominated sectors of education and healthcare are highly centralized and mostly funded by the government or state-mandated funding sources such as college loans, insurance, etc.
Combine this with the decline of entrepreneurship, and you get a bubbling brew that is toxic to self-employment/small business. What entrepreneurship remains in the working class is often black-market/cash-economy, and thus is not included in these statistics.
Much has been made of the rising participation rate of those 55 and over (me included). But if we glance at the chart, we see the 55+ participation rate has merely bounced back up to the participation levels of the “golden age” 1960s.
In other words, the anomaly was the drop in 55+ participation, not its rise to historic norms.
Gordon and I cover many other topics inThe Participation Rate Mystery–Solved (25 min.), including the impact of the soaring costs of childcare:
I’d like to see a chart that has two lines (avg Income vs avg Gross Welfare Benefits) plotted with dollars for the Y-axis and years for the X-axis, I believe Income will be a down ladder and Welfare a up ladder. Any first grader will see where it became smarter to have babies than work.
Labor force participation has declined and will continue to decline because we don’t need the number of workers we used to need to support the culture.
Between transferring labor intensive productive industry out of the country and higher efficiency in the jobs we decided to keep, nowhere near as many workers are needed today as there were, say, 30 years ago.
As the robotics revolution, now in its beginning stages the way the industrial revolution was in the latter 1880’s, grows and takes over larger and larger segments of workers jobs we will eventually see most people moved into the unnecessary class (the way ditch diggers were unnecessary after Mike Mulligan and his steam shovel replaced them and then got replaced himself by even more modern equipment).
We don’t really need over maybe 20 or so million people here, a managing class supported by and maintaining a leisure class which is serviced by a minimal number of servant class to take care of their needs.
People are mostly obsolete, get used to it..
Soon there will be Social Security for everyone, with strict price controls on food, meds, rent, and so on. This has to be done as having tens of millions of people roaming the countryside looking for food and a roof is just not practical — give it to them or they’ll take it.
Thanks for posting this Admin.
I’d forward link to my boss but worry that I might get Christmas present I don’t want.
Charts lay it out simply and pose questions that need to be asked. Seriously how can we be in midst of a recovery when all the signals are pointing in wrong direction. I’m with SpecOpsAlpha on this one. There is going to be a massive involuntary bail-in imposed on those who were prudent. We will be asked to tip the band playing tunes as the Titanic slips beneath the sea.
We ( U.S. and the rest of the 1st world countries) have never been out of this recession……ongoing for 7 to 15 years now!…….. I think the civilized world is going to become rather chaotic, rather soon……..stair-stepping into collapse!
People have just the fuck given up, that’s why.
Hope is right. You don’t need to pull out charts and graphs to understand the problem, there are no good fucking jobs, period and people have given up. The REAL unemployment rate is 20-something percent according to John Williams at Shadowstats. All the gov numbers are a charade.
Who needs to work when, you know, Free Stuff! Yeah, baby!
It is frickin nuts that people will pay $800-$1500 a month to put their infant in a daycare so they can go to work and make $X. Well its not just the cost of daycare, its also the cost of that 2nd vehicle, which you dont really need if you dont need to drive to daycare and work. Once you add in all the expenses of that 2nd vehicle, the monthly cost soars to well over $1000 a month, minimum. And it can very easily hit $2000 or hell even $3000. But even at $1000 a month, that is $1000 a month in after tax income, or roughly $1400 a month in before tax income. That’s $17000 a year, with the potential for upwards of $40000 a year if you go on the higher end of the estimates. That is one hell of a lot of money to pay to rob your own child of the absolutely most important thing that child needs! I never understood it, and I do hope that particular chapter of insanity is coming to an end.
Gentlemen,
I am compelled to chime in. My Dad used to say college was important
for women so they could contribute (intelligently) to the conversation.
My own husband says it is a mistake for women to vote. Too emotional,
vote for expanding welfare. I agree.
No, women can’t “have it all.” Absurd. I cringe at the thought of placing
an infant into “day care.” Maybe it is about keeping up appearances for
the neighbors? That is just stupid.
iconoclast421, you nailed it. Women placing little ones in daycare so they can
“work” isn’t financially sound. Further, if a woman cares so little for her baby,
the couple should get a cat and forget being parents.
The whole welfare model where women are paid by the public so they can
stay home and take care of their children is really backwards. Cap that
action at one child.
Men need to wake up. They are getting trampled on. Marry a decent woman
or don’t get married at all. Or, marry but do not create babies. Wrong woman?
Divorce court and impoverishment for both. What a mess we made with all the
“liberalism.” I for one, would prefer not to pay for an ignorant underclass to
have babies for money. And so would most of us. Ungrateful ignorant freaks
making demands and threatening people/harming people/whites in particular.
How can this be stopped?
Thank you, Suzanne
It’s all good.
By next year, machines will be doing all the work, and humans will simply get whatever they want from the machines.
We won’t have to do a damn thing all day but watch TV.
The good jobs for workers with less than a masters degree have been shipped to China. The Bachelors degree people are already working in McJobs. The PhD’s get jobs in government and tell us how wonderful the economy is.
The country I knew 40 years ago has been completely destroyed in the name of short term profits. Aided by the government and their treaties.