Shrinking labor pool reflects economic, demographic realities

08/31/2014 7:15 AM

08/31/2014 7:21 AM

The unemployed are disappearing.

Five years ago there were 30,000 people in the Wichita area scouring the help-wanted ads. In July, there were fewer than 17,000, a number that dwindles a bit more every month.

It’s not that they’re finding jobs – the number of people working locally is up only slightly, if at all, in the last few years – it’s that a lot of those who used to be counted among the unemployed have stopped looking for jobs.

They’re sitting at home, living with relatives, going back to school, moving out of state or something else.

The shrinking of the workforce – which consists of working-age adults who are working and looking for work – is happening nationwide, as well as in Wichita.

Even though the U.S. economy has finally regained all of the jobs it lost in the recession, the percentage of people in the workforce continues to fall, from 65.9 percent in 2007 to 62.8 percent this year, a decline that represents millions of people and the lowest rate since the late 1970s.

Nearly every segment of the population – men and women, the young and the middle aged, whites, blacks and Hispanics – is seeking work in smaller percentages since the recession.

A comparable participation rate isn’t calculated for Wichita, but the metro area workforce as a percentage of the overall population has fallen from 52 percent in 2007 to 47.5 percent for the most recent population count last year.

The fact that the participation rate continues to drop even as the economy recovers has surprised economists and policymakers.

And while that shrinkage isn’t necessarily a wholly good- or bad-news story – experts say there are different causes – it does foretell a lot of damaged lives, greater financial strain on society and slower economic growth in the future.

Jim Tindal of Wichita started taking Social Security this year at age 66.

Tindal was one of the people at Hawker Beechcraft who married IT with manufacturing on the factory floor. But in 2009, after 14 years, he was laid off.

He looked hard for work after the layoff. He searched in other cities, applied inside and outside of the aircraft industry, and said he made it clear that he didn’t expect the same pay.

He got few callbacks and no job offers, he said. He chalks it up to a combination of a weak job market and age discrimination. He was 61 when he lost his job. Since then, he’s managed to get a year’s worth of contract work, but nothing else.

He was offered a pension as a Hawker retiree, he said, but in adding insult to injury, he was only credited with eight years of service.

“We’ve been able to get by, but it’s nothing compared to what I had expected,” he said.

Why?

Behind the dynamic that has shrunk the nation’s workforce is a twin phenomenon: the recession and its “jobless recovery” coupled with significant demographic changes.

In a report released in July, the Council on Economic Advisers, which advises the White House, chalks up about 50 percent of the disappearance nationwide to the beginning of the retirement of the nation’s 76 million baby boomers.

Another 20 percent of the decline, it said, is due to disruptions typically caused by recession. This is unemployment in which people are laid off, can’t find a job for a period of months, stop looking and then start again as the economy begins to recover. This will fix itself as the economy recovers.

But about 30 percent of the decline is a grab bag of long-term factors, such as: the long-term unemployed, more people staying in college or returning to school and more people going to prison.

The number of long-term unemployed, the 3 million or so people who have been out of work for more than six months, is the most worrisome, experts say.

The report notes that the long-term unemployed face even more challenges than others. Research shows they are half as likely to get called back by potential employers than are applicants who have been out of work only a short time.

The report’s authors said it’s not clear why the long-term unemployed have such a hard time getting work, although they said employers stigmatizing them may be part of the answer.

The rise of the long-term unemployed in particular is “sobering,” said George Bittlingmayer, a professor of finance and economist at the University of Kansas.

Bittlingmayer agreed that the recession accentuated some deep-seated trends in the economy, such as the displacement of lower-and medium-skill workers, particularly in manufacturing.

“There are some long-term forces at work, the shift out of manufacturing and into services, and the Great Recession accelerated things,” he said. “What we are seeing is a jolt that moves us in the direction that underlying forces … were pushing us toward.”

Retiring baby boomers

The first baby boomers turned age 62 in 2008 and 65 in 2011, and every year a new group will turn 65 until 2029.

Their expected impact on Social Security, Medicare and Medicaid has created serious issues about the viability of the country’s most popular entitlement programs, as well as fueling political debates over the nation’s debt, the deficit and whether the government is hindering or helping growth.

In Kansas, the number of 65-year-olds receiving Social Security rose from about 2,500 in 2007 to 8,700 in 2013, according to the agency.

There’s lots of evidence that the recession pushed many baby boomers into retirement years before they had planned to stop working. Many boomers lost jobs and because of their age and the state of the job market, they decided they would just “retire early.”

If they were able.

Some boomers who are working just aren’t able financially to quit. They may have had their savings wiped out by long unemployment or underemployment, or the stock market plunge, or they may just not have saved enough.

And, so, the one segment of the population that has gained in workforce participation has been those 55 years old and older.

Gerald McCoy, 60, is the director of the Downtown Senior Center, 200 S. Walnut. He loves his job and is thankful to have it, but figures he’ll have to work until he can’t work anymore.

McCoy was a longtime program planner for Boeing Wichita when he was laid off in 2006 when the company cut positions in its military modification operation. A year later, while out of work, he developed complex health problems that required expensive medical treatment and surgery. In all, he said, it cost him $112,000 – wiping out his savings.

Two years after that, Boeing provided him with early retiree benefits, including medical insurance.

McCoy said he’s still broke, although he hopes to build up another nest egg while he’s still physically able to work.

“The sad reality is that among aging baby boomers that story is not unique,” he said.

Unemployment office

The Workforce Alliance, what was once called the unemployment office, was pretty busy on a weekday morning last week.

It moved from downtown to a shopping center at 21st and Amidon, reopening in June. The interior now resembles a clean, unremarkable, modern office equipped with computer stations and cubicles.

Last week, it was filled with people searching for jobs on computers or taking basic office classes such as Microsoft Word.

Pashion Lewis of Wichita is one of those who expects to re-enter the workforce after a long time out. She was searching for information on a certified nursing assistant certificate class. She hopes to eventually to move into a certified medical assistant position.

She said she has worked in customer services and retail, but in the last few years she has stayed home to raise her children. She has four children, from ages 1 to 13. One is autistic, she said.

They are getting by on Social Security disability and child support. It’s not a lot, and she’s looking for more, she said.

“He’s old enough to go with someone else, so it’s time to look for a job,” she said.

Nearby, Julie Feagan was doing a job search. She has been out of work since early this summer after the attorney she worked for eliminated her job as a collections agent.

She said she’s raising her three grandchildren. She worked at her old job for years and loved it. She said she doesn’t expect any collections phone calls herself, at this point.

“Most people want to pay their bills,” she said. “The unemployed still got to pay their bills. I have to pay – and that’s why I’m here two or three times a week.”

Alliance president Keith Lawing said that from where he sits, the employment picture in Wichita seems to be perking up, finally. But he also acknowledged a large group of people seem to be getting left behind.

“The number of people employed has gone up,” he said. “There are more job fairs. Employers are more interested in hiring. We’re in a really weird place in the job market right now.”

Wichita is worse

A just-released review of Wichita’s labor participation rate by Wichita State University’s Center for Economic Development and Business Research concludes that those factors are all in play in Wichita – plus one more.

Wichita has always been a big manufacturing center. Manufacturers’ drive to increase productivity and cut costs through automation and outsourcing has had an outsized impact on Wichita.

In the most obvious instance, Wichita’s aircraft workforce has fallen from 42,000 in 2008 to 26,000 now because the general aviation industry is in a depression, but also as a result of long-term cost-cutting measures.

The impact is seen in scores of ways across the community. In one instance, Catholic Charities says that need at its Our Daily Bread Food Pantry, which serves families, continues to grow. It served 36,000 families in 2011-2012, 43,500 in 2012-2013 and 51,000 in the year ending June 30.

“We’ve seen an increase in the numbers of families and in family sizes,” said Catholic Charities’ Heather Welch. “These are the working poor looking to supplement their monthly budgets.”

But Jeremy Hill, director of the development center at WSU, also sees reason for optimism. Aircraft may not be expanding, but other sectors, particularly construction, say they are ready to expand and are having trouble finding enough workers trained and ready to go.

A year ago, that meant griping about workers not having enough skills. Today, it means finding the money to train workers, he said.

And that means some of those discouraged workers may have a path forward, after all.

“There are still people who are discouraged,” Hill said. “Our businesses are doing more investment in training. They’re willing to train people who have skills similar to what they need.

“The opportunities will improve and some of them will be drawn back in.”

Reach Dan Voorhis at 316-268-6577 or dvoorhis@wichitaeagle.com. Follow him on Twitter: @danvoorhis.

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