Thursday, February 10, 2011

Chart of the week: taking yourself out of the labor force

Credit: Mike Konczal, Rortybomb.
Above is one of the more frightening graphs of the recession from Mike Konczal of the progressive Rortybomb econoblog. How are people leaving the ranks of the unemployed? Well, a higher percentage of the unemployed are simply leaving the workforce, as opposed to actually finding a new position.

Consider a hypothetical process chemist in her late-50's. Assuming that the family finances are in relatively good shape, will she go out and attempt to find a new position or simply retire a little earlier? A lot more people are choosing the latter option.

Best wishes to all of us.

6 comments:

  1. A slightly different measure that is also scary

    http://wjmc.blogspot.com/2011/02/us-employment-to-population-ratio.html

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  2. When you look at all those pharma and biotech sites that are now shuttered and exacty where will any such laid-off chemist find that next job? Even in the best of times if you are older than 45, it was always difficult find any job to replace the one you lost. Now it is impossible.

    The ACS will view this as a potential opportunity crisis. After all with all those middle-aged chemists leaving the workforce clearly a shortage of chemistry manpower is here. They will try to panic the government into letting more talent into the country and granting ever more money to train even more chemists. That is just what they do to support chemistry in America.

    With so much new meat around, industry will have plenty of young inexpensive ones to fill the few new job slots that do materialize.

    The good news is that as higher paid older people stop paying high marginal rate taxes and start sucking money out of the system much less money will avaiable to throw at new chemistry training.

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  3. You are right. I am in my early fifties and when I lost my job I am not going to look for another one but try to make do with what money I have.

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  4. Ravathi,

    Can't you hang up a shingle and do some occasional consulting work? I mean, when money isn't priority numero uno, you can have the opportunity to freelance and do whatever you want. Teach adjunct, part time work, synthesis and analytical consulting. Maybe even take a couple of tours of southeast asia. It's chumps like us in the rank and file who need to play the rat race to get prestige, experience, and pay off student loans that can't just passively play the game for the sheer "passion" of it.

    It seems that the best, proudest, most self satisfying and most lucrative businesses come when money is no longer a necessity. Oh the irony.

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  5. Like the first comment alludes, the labor participation rate is an important metric. The mainstream media tends to hyper-focus on the unemployment rate without putting those figures in context.

    As the recent BLS data and the chart above show, the labor participation rate is low. It's mind boggling that so many are just dropping out of the job market!

    Perhaps UC Davis economist Gregory Clark is onto something...http://www.washingtonpost.com/wp-dyn/content/article/2009/08/07/AR2009080702043.html

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  6. Retirement isn't an option for a lot of middle-aged people though - lots of IRAs took a kick in the pants during the recession. Lots of places cut pensions or are raising costs (my employer froze the defined-benefit pension for everyone (with a defined contribution plan in place) and health benefits for all retirees at 2009 levels, OH state pensions are likely to increase in cost and increase further when OH screws and annihilates the state unions), and so anyone within ten years of retirement who can't find a job probably can't retire, either. The increases in health care costs mean that even if you have a robust retirement, you might still have problems retiring because your health insurance/care costs will eat up a lot of that money until Medicare kicks in (and maybe even then).

    Lesson of the recession: unless you have friends in high places, you are expendable. If people are expendable, and the payout for getting an expensive education (either in direct cost or opportunity cost) is nonexistent, you shouldn't expect a whole lot of scientists or engineers in the job pipeline. We know that politics doesn't reward intelligence - I guess we'll see what happens when the job market doesn't, either.

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