We’ve seen great improvement in reducing unemployment in the nation and state in recent years. Many economists think the most frequently cited jobless rate could fall under 4 percent. There is talk of the labor market being at “full employment,” and a number of companies are now citing problems of finding qualified workers as their biggest problem.
But there’s a type of unemployment that’s missed in the jobless rates we see released. I call it “invisible unemployment,” which is composed of individuals of working age (25-54) who aren’t working and are not looking for work. They’re not included in the most used unemployment numbers because they don’t meet requirement for inclusion in these numbers. They are not seeking work by visiting potential employers or sending out resumes. The invisible unemployed are working-age individuals who have dropped out of the labor force.
Studies show the number of the invisible unemployed fluctuates with the business cycle — rising during recessions but falling when the economy expands, but still the number has trended upward in recent decades. Among men, the invisible unemployed as a percent of the labor force was under 4 in the 1950s but has risen to over 10 percent today.
These rates put the current number of invisible unemployment for men at near 7 million in the country and 230,000 in N.C.
What are the reasons behind the increase in invisible unemployment? The rise in drug addictions — particularly to painkillers like opioids — has been a big contributor. Half of the men among the invisible unemployed are estimated to have painkiller addictions that make them unemployable.
Another reason is the decline in traditional manufacturing jobs. Traditional factory work offered reasonable pay to individuals without a college degree and who were capable of physically challenging work. Since its peak in 1980, manufacturing is down by one-third in the nation and by almost half in the state. The manufacturing work that does remain increasingly requires education beyond high school.
Perhaps the biggest change from the past is the lack of mobility among the invisible unemployed. In earlier times unemployed persons would move to where they could get work. We’ve certainly seen this in N.C. the last 40 years as people relocated from rural areas to rapidly expanding metropolitan areas like Charlotte and the Triangle.
Yet the growth in the big metros has caused those areas to become more expensive. For many, this means their economic situation is better staying put. That is, living with even modest public support, or from the charity of friends and family, in a low cost-of-living area is better than living in a high cost-of-living region with a job. As a result, the migration of the invisible unemployed to the job-rich metro areas has declined recently.
So what’s the solution if we want to reduce the ranks of the invisible unemployed? There appear to be two options. One is to bring jobs to counties and towns where the invisible unemployed live. The other is to work on more reasonable living costs in the metropolitan areas so the invisible unemployed can move and find jobs.
For a long time N.C. has been trying both. State and local governments have an assortment of incentives packages and other inducements designed to attract businesses to high unemployment areas.
However, the results have been mixed. Many large cities have also made increasing the supply of affordable housing a priority.
But there is reason for heightened optimism as private firms are beginning to address the problem. As the metros run out of available workers, there is more incentive for new and expanding firms to consider locations in smaller towns and regions.
There have been national stories about private firms in tight urban labor markets actively seeking out and recruiting individuals among the invisible unemployed. The firms help those with addictions reduce and end their dependence, and then the firms train the individuals for needed skills. The businesses get trained workers, and the workers get a paycheck and freedom from addictions.
Both these approaches rely on a faster growing economy driving unemployment rates so low that companies become very motivated to find available labor. Therefore, this is another benefit of pushing economic growth into a higher gear.
For many, unemployment has become a way of life. Ensuring a job for everyone who can work and wants to work is a laudable goal. However, today we may be in the “sweet spot” of the economic cycle where it is more achievable than at any time recently. Can we keep the progress going? You decide.
Mike Walden is a William Neal Reynolds Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of N.C. State University’s College of Agriculture and Life Sciences.