Demographic Destiny

   The labor force is changing, and no longer reflects economic needs in the way it used to. But as economic needs change, so does the makeup of the labor force. Moreover, this is especially true of the long-term unemployed.
   For example, the demographic composition of the work force is different. The Baby Boom generation is nearing retirement, and many are already in the ranks of the long-term unemployed. As they age, their chances of re-entering the work force and getting a job are declining. Result: that cohort of the work force is thinning, even as the work force as a whole is increasing.
   "Even in good times, the long-term unemployed are on the margins of the labor market, with diminished job prospects and high withdrawal rates," said three Princeton University economists in a new study. Moreover, those in this group "exert little pressure on wage growth or inflation," the study said. It was written by Alan B. Krueger, Judd Cramer and David Cho of Princeton, and was published by the Brookings Institution.
   Separately, the U.S. Labor Department said the labor force -- the number of people working or looking for work -- "has gone through substantial changes in size and demographic composition over the last half of the 20th Century." But after the wave of women and those in the Baby Boom generation began to recede, through retirement and other factors, growth in the labor force is declining. It's still growing, however, and is expected to total 163.5 million by 2022, the government report said, for an annual rate of 0.5 percent.
   Moreover, the labor force is becoming increasingly diverse even as it grows. Reason: Immigration and increased participation by minority groups.
   A century ago, agriculture took up much of the labor force in America, and then manufacturing took the lead. More recently, the service industry hired more workers than other fields. Now, technology leads the way, demanding higher skills and more education than was needed in agriculture or manufacturing.
   However, even technology geeks need food, clothing and shelter. And the next time your car engine conks out, try asking a computer whiz or a surgeon to fix it.
   Moral: The more complex the economy, the more support it will need from farmers, mechanics, plumbers, electricians and carpenters. Technology enables more efficient production, but this calls for more knowledgeable workers at all levels.
   And the longer a person is unemployed, the less likely that person is to find a good job. Therefore, Krueger, Cramer and Cho conclude, "the long-term unemployed are an unlucky subset of the short-term unemployed."
   This is not to say they are unimportant. It does mean, however, that short-term unemployment is a better predictor of inflation and wage growth than the overall unemployment rate, the authors said.