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Are people really dropping out of the labor force?

The effort to recover from the pandemic has exposed an interesting phenomenon: the assertion that people are dropping out of the labor force. Supporting this assertion is the observation that millions of women left their jobs when their children’s school districts went virtual. Economists argue that returning to the workforce will not be as simple as just going back to work.

The Bureau of Labor Statistics (BLS) projected the US workforce to grow by a slim 0.5% per year through 2024. That was before the pandemic. Right now (or at least as of December 2021), the workforce participation rate was 61.9%. This percentage reflects the number of people in the US who are at least 16 years of age, not enlisted or otherwise serving in the military and not institutionalized. That figure makes it seem like 38% of us are just sitting around.

Note that the labor force participation rate does not exclude people who are retired. Retirement is a significant factor. According to the Pew Charitable Trusts, as of the third quarter 2021, 50.3% of people aged fifty-five or older reported that they are no longer in the workforce because they are retired. Numerically, that is about thirty million people. Right now, the US labor force consists of about 163M people. Subtract the retirees and that leaves 132M people, 62% of whom (82M) are already working. That leaves a potential participation increase of 50M people, who are eligible to work but do not.

Childcare determines who is dropping out of the labor force

About 20M people in the US are college students. Although they may work, they are less likely to because of their educational status. If you continue to peel the labor force onion, you find that some people who are (on paper) “in the workforce” are disabled. Right now, about eight million Americans have a disability that prevents them from working.

So, who is dropping out of the labor force? It appears to be parents (mostly women) who cannot afford (or find) childcare, or who cannot earn enough to pay for childcare on top of the rest of their monthly expenses.

Michigan has one of the highest weekly average childcare costs in the United States. With costs approaching $375 per week, full-time (or near-full-time) daycare costs could exceed $19,000 per year. In 2021, Michigan’s “wage gap” was $0.23 cents. Women earn – on average – $0.77 for every dollar men earn when performing comparable work.

According to MIT’s Living Wage Calculator for Washtenaw County, a woman with one child would need to earn more than $75,000 per year to support herself and her child. (Two children -$103,000. Three children, $140,000.) According to the Bureau of Labor Statistics, the 2020 average weekly wage for a Michigan woman was $900 per week.

Childcare costs and availability significantly influence whether, when, and how often women can participate in the labor force.

This is why WCC’s decision to close The Children’s Center is so backwards and so bone-headed. Nothing more neatly constricts a woman’s ability to work than lack of affordable childcare. And at exactly the time Washtenaw County women most need affordable childcare, the WCC Administration had a better idea.

Photo: Small children’s hand lies on a hand mom by Marco Verch under Creative Commons 2.0, via Flickr