Nearly every type of business establishment in Salem is currently displaying a “hiring” sign in its window.
This likely means that employers are still having a difficult time hiring for open positions. But, according to the latest economic information, their hiring difficulties may ease up a bit in the immediate term.
Here’s why.
As the pandemic waned, “quit rates” — the percentage of workers quitting their job in a month — increased dramatically as workers in low-wage occupations and industries such as leisure and hospitality quit jobs to find better ones (see graph below).
Employers then began to offer higher wages and improved working conditions to attract job applicants. They should be seeing increased employee retention and some let-up in their hiring difficulties as their actions work through the labor market.
Another reason for employers to see some relief from the tight labor market is the fact that labor force participation, an oft-cited measure of labor supply, recovered to its pre-pandemic level and was 62% in July 2023. This means that 62% of the non-institutionalized population aged 16 and older is participating in the labor force by either working or looking for work.
A high participation rate and a low unemployment rate means that the economy is healthy. The unemployment rate, at 3.5%, is low. But is a 62% labor force participation rate high? By historical standards, it is not.
Raising participation rates would expand the size of the labor force, which would be a boon to employers as more individuals enter the labor market to look for work. But this won’t be easy to do. That’s because participation rates, in Salem, Oregon and the U.S. have been declining for decades, and largely because of public policy choices.
Let’s see how all this works.
Trends in labor force participation have been mostly declining over the last 50 years or so, with one exception – I’ll discuss that later on.
Most dramatically, labor force participation has been declining among men, and even prime-age men. (see graph below). Looking at prime-age participation rates factors out younger and older participants, both groups having lower participation rates.
Prime-age men’s labor force participation declined about four percentage points from the 1970s to 2022. This may not seem like much, but there are 87,000 men in this age group in the Salem area (Marion and Polk counties combined). If 4% of them were working or looking for work, this would add some 3,000 men to the area’s labor supply.
Why the decline for men? Many economists agree that offshoring of jobs to where labor is cheaper and automation are among the main culprits, and are due in large part to public policy choices over the years.
Two types of jobs have resulted: low-skilled and low-paid jobs; and those that require advanced skills and pay well.
So, men with few skills can take a low-paying job or acquire more skills and/or education. Neither is easy to do. As a consequence, over the years labor force participation rates for men with lower skills and educational attainment have declined to about 20 percentage points lower than men with bachelor’s degrees.
Prime-age women are the bright spot in participation trends. Women’s prime age labor force participation is at an all-time high even among women with young children.
As the pandemic was especially stressful for women with children, the strong post-pandemic rebound in their participation rate is somewhat surprising. But one factor that contributes is that women are now surpassing men in earning bachelor’s degrees. High levels of educational attainment and increased participation in the labor force are highly correlated.
Labor force participation among youth aged 16-19 is yet another story. Teen participation peaked in the late ‘70s and early ‘80s at about 55%, then steadily declined to 37% in 2022.
Working in the mid-to late teen years is important for later life, according to the federal Bureau of Labor Statistics longitudinal studies of youth. Government researchers interviewed thousands of people from their teen years into adulthood and found that early work experience provided youth with an entry into the formal job market, and that working in high school resulted in higher earnings later in life. Not only are employers missing out with declining teen participation, but teens are missing out as well.
There is general agreement on how to raise participation rates, and the recommendations fall into two categories: increased funds for workforce training and more family-friendly job benefits.
Workforce training funds, most of which come from the federal Department of Labor, have been steadily declining since the 1980s and fall far below what other industrialized countries spend on investing in their workforce. The local workforce board, the Willamette Workforce Partnership, receives about $5 million yearly for training programs, and serves four counties, Marion, Polk, Yamhill and Linn. Their funding is stretched pretty thin.
Family-friendly job benefits still not enjoyed by all workers include paid family and medical leave, paid sick leave, and high-quality affordable child care. The U.S. is the only industrialized country that does not directly subsidize child care for most working families, for example.
Teens are a special case. Some of the decline in teen labor force participation is due to more teens beginning post-secondary education. But that’s not enough to explain an 18% decline in the participation rate. Over the years, restrictions have been put on where and when teens can work. The result has been fewer opportunities for teen employment.
The Willamette Workforce Partnership recognizes the importance of work experience for youth – about half their training dollars fund youth programs. Last summer the partnership offered Marion County’s small employers a wage subsidy for employing teens – it expires on September 30, so we’ll have to wait for results.
This discussion wouldn’t be complete without mentioning immigration. U.S. policy over the last several decades has slowed immigration considerably. There is consensus that immigration has historically been a major contributor to the labor force and could be again but it would take a change in U.S. immigration policy to effect this.
One way employers are involved in trying to change public policy to attract more people into the labor force is through employer associations. For example, the U.S. Chamber of Commerce has been actively lobbying for years for many of the changes listed above. And state and local officials are working toward the goal as well. In November 2022, the Oregon legislature appropriated $200 million for job training. And, the funds for the teen wage-subsidy program last summer came from Marion County.
All this helps, but much more is needed in order to increase labor force participation to the levels where employers have the workers they need. In our current state of divided and divisive politics, this isn’t easy.
Pam Ferrara of the Willamette Workforce Partnership continues a regular column examining local economic issues. She may be contacted at [email protected].
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Pamela Ferrara is a part-time research associate with the Willamette Workforce Partnership, the area’s local workforce board. Ferrara has worked in research at the Oregon Employment Department, earned a Master’s in Labor Economics, and speaks fluent Spanish.
