Hard Questions About Oregon’s Employment Picture

Right From the Start

Right From the Start

Last week the Oregonian published an article on the declining labor force participation rate in Oregon. Well it wasn’t actually an article – it was a rewrite of the Oregon Department of Employment’s press release right down to the pretext of the decline that holds Gov. John Kitzhaber and three decades of Democrat administrations blameless. Not a single critical question was asked by the Oregonian. Not a single moment was spent on any independent research. It’s what happens when a decidedly liberal press corps evolves from watchdog to lapdog.

I suppose one can be encouraged that Mr. Kitzhaber and the Oregonian have stooped to even acknowledging the labor participation rate in contrast to the much ballyhooed and specious unemployment rate. Mr. Kitzhaber has trumpeted the declining unemployment rate in Oregon for the past several years as if it were a sign of an improving Oregon economy. It is not. The decline in the unemployment rate in Oregon is due more to people giving up, unemployment benefits drying up, and welfare benefits increasing than to an improving economy.

In previous columns I have noted that Oregon has still failed to replace the jobs lost from peak employment in 2008 let alone provide employment for the increasing number of people that are workforce eligible due to population growth. At current rates it is doubtful that Oregon’s employment growth will reach the peak real employment percentage any time before 2025, if ever. But there are even more important trends in employment in Oregon that the quiescent press in Oregon continues to ignore.

First, lets understand what the labor force participation rate is. It is the sum of those employed and those seeking employment divided by the available noninstitutionalized workforce – meaning those sixteen years and older and not incarcerated. The labor force participation rate in Oregon has been on a nosedive since 1998 and now rests at its lowest level since 1976. It has dropped faster than the national rate which is also at its lowest rate in over three decades and faster than the average of the Pacific states. Which gives rise to the first question that should have been asked:

Why is Oregon’s performance worse than the national average and worse than its neighboring states?

Mr. Kitzhaber’s press release cites three reasons for the decline in the labor participation rate leaving the clear impression that none of this is his fault or the fault of three decades of Democrat administrations. The excuses are 1) the expanding retirement of the baby boomers, 2) young people seeking additional educational opportunities rather than working and 3) the Bush/Obama recession. The first two are speculation and without statistical support for Oregon. The latter is true but no more so in Oregon than elsewhere. So what does account for Oregon’s poor job performance?

Well a clue may be had in the changing makeup of Oregon’s employment picture. Which gives rise to the second question:

What accounts for the changes in Oregon’s workforce segments and why?

In 1990 Manufacturing accounted for slightly over twenty percent of the state’s workforce – good paying, stable jobs. Today that figure has fallen to about twelve and one-half percent – about a thirty five percent reduction. It becomes even more dramatic if you compare the number employed in Manufacturing to the total population. In 1990 Manufacturing accounted for 7.25 percent of the population while in 2014 it accounts for only 4.6 percent. The percentages for Construction have remained relatively constant but those for Trade, Transportation & Utilities – again well paying stable jobs – have dropped from twenty-six percent of the workforce to twenty-three percent. In contrast Leisure & Hospitality – basically minimum wage jobs have increased from about ten and one-half percent to slightly over twelve and three-quarter percent. And while this latter figure does seem to be much of a dramatic change in represents an increase of nearly 70,000 jobs – all at the lowest end of the pay scale.

In essence the job quality in Oregon is falling as fast as the labor participation rate. That is confirmed by the fact, according to the United States Department of Commerce (Census Bureau), median household income (in constant dollars) in Oregon fell from $51,981 in 2000 to $49,161 in 2012.

And that brings us to the final question:

What is the relationship between Oregon’s welfare system and its employment numbers?

In the meantime, welfare payments in Oregon increased dramatically during the same period. A 1995 Cato Institute study found that the average welfare benefits available equaled $25,625 per annum. It placed Oregon 25th amongst the states. An updated study in 2013 saw Oregon move up from 25th to 13th and the value of benefits to $31,674. In both instances, those benefits resulted in an income in excess of the then minimum wage. But even more important was the numbers of welfare recipients have increased dramatically. A 2009 Wall Street Journal article noted that the number of recipients in Oregon increased 27% from May of 2008 to May of 2009. And that number has not dissipated.

In essence Oregon’s job mix has shifted decidedly toward unskilled, lower income jobs. However, those jobs tend to be physically difficult or extraordinarily dreary. The differential between what one earns in such jobs and welfare benefits is practically non-existent. Good jobs are lacking, poor jobs are abundant and the generosity of the state’s welfare system ensures that no one willing to put out even a slight amount of effort need go without food, shelter, clothing and medical care, let alone a flat screen television, a cell phone or birth control.

And all of that is about the attitude of those in charge of government – in this instance three decades of Democratic administrations.

It is little wonder that the creators of the television series Portlandia, Carrie Brownstein and Fred Armisen, have labeled Portland as the place where thirty-year-olds come to retire.