A Rising Tide Puts the Nation to Work

Lured in part by the first broad-based wage gains in two decades, nearly 12 million new workers have flooded into the nation’s workplaces during the 1990s, raising the proportion of Americans at work to its highest level in history.

The influx of new workers--notably women, immigrants, refugees from retirement and millions who had been destitute or on welfare--is helping to extend a boom that many feared would stall for lack of enough strong backs and bright minds. Their arrival at work is demonstrating the American economy’s powerful capacity for easing social problems and improving the lot of the vast majority.

Among the boom’s most recent accomplishments:

* The first substantial improvement in decades in the economic standing of historically disadvantaged groups such as African Americans and Latinos. Joblessness among the nation’s 34.5 million African Americans, which averaged almost 15% in the 1980s, was 8.1% in March--still twice the overall national rate, but nevertheless a near record low. Among Latinos, unemployment stands at 5.8%, an all-time low.

* A large--and largely unexpected--shift of former welfare recipients into the work force. This has smoothed the transition to the stricter rules and reduced benefits of a 1996 welfare reform measure that critics had predicted would cause widespread dislocation.

* An easing of such diverse social problems as poverty, crime and the threatened insolvency of public pensions and medical insurance. Across the country, crime rates have dropped as jobs and wages have climbed. Meanwhile, Social Security and Medicare coffers have swelled with a boom-fueled growth of payroll tax receipts.

* The little-noticed end to a long trend toward early retirement that economists feared was draining the nation of its most experienced workers and could have proved especially disastrous when members of the huge baby boom generation begin reaching their late 50s and early 60s.

Perhaps most impressive of all, the economy’s accomplishments have been accompanied by the first substantial wage increases since the 1970s to flow not just to the affluent but to Americans of all income levels, especially the poor.

The increases are proving particularly valuable to workers because of the virtual absence of inflation to corrode their worth. And employers are finding the raises comparatively easy to bear because of an unexpected jump in productivity that is increasing workers’ output in rough tandem with wages. The real hourly wages of the typical U.S. worker have risen 5% since the mid-1990s, reversing a similar-size decline during the early part of the decade, according to government statistics.

“This has finally become an expansion in which a rising tide is lifting all boats,” said Janet Yellen, chairwoman of the White House Council of Economic Advisors, a refrain sure to be heard with growing frequency from Democratic presidential contenders.

“American employers are demonstrating their spectacular ability to vacuum new people into the American economy when they need them, much as they did in World War II,” said Robert M. Solow, a Nobel Prize-winning MIT economist.

To be sure, the rush of new jobs and workers is not coming without strain. Some firms are having to shift work to high-unemployment areas to find new workers and are having to offer expensive perks like on-site day care and higher wages even when competition prevents them from raising product prices. Many families face disruptions caused by lengthened workweeks and a new climb in the proportion of women who work, a trend that some social scientists thought had peaked.

And looming over all of the recent changes is the question of how durable they will prove when, as almost certainly will happen someday, the economy switches from growth to contraction.

Subhed Goes Right Here

But for now, analysts say, the good times should roll on and, with them, the prospect of still more jobs and rising wages for a growing share of the population.

“This expansion is not going to end because we run out of workers,” said Alan B. Krueger, a Princeton University labor economist.

In this regard, the 1990s are similar to other periods of U.S. history when the country has demonstrated an uncanny ability to bulk up its work force to meet need. During World War II and again during the social changes and economic upheavals of the 1970s, for example, it drew vast numbers of women onto the job rolls.

What’s different today is that the expansion is occurring just as many economists had concluded that the nation was finally reaching the upper limits of job growth. The thinking was that those women who were going to enter the work force had already done so, older workers would continue to retire earlier and earlier, and the growth of the work force would continue to slow.

In fact, almost none of these trends has played out as predicted. Combined with a huge influx of immigrants, the result has been a steady expansion of both the U.S. labor force and the proportion of Americans working.

From just under 126 million people in 1990, the labor force grew to just over 130 million in 1994 and to almost 138 million by last year, according to the Bureau of Labor Statistics. Labor force participation, defined as the percentage of working-age Americans with jobs or looking for them, climbed to 67.1%.

“Participation rates have been higher than we’d expected,” conceded Neal H. Rosenthal, an associate BLS commissioner who heads the government’s employment forecasting operation. “We seem to keep finding the bodies to hire,” added J. Bradford DeLong, a UC Berkeley economic historian and former Treasury official.

In normal times, the introduction of 12 million workers into the economy might be expected to drive wages down, not up, and make it harder, not easier, for the poor and less educated to find jobs. But the recent increase in the supply of workers has been matched--and then some--by employers’ needs for them. Companies in many parts of the country report growing signs of labor shortages and tell of having to make increasingly complicated adjustments to cope with them.

Staples Inc., the Massachusetts-based office supplies chain, was forced to give up plans to put a distribution center in Champaign/Urbana, Ill., after discovering that the local unemployment rate was a mere 1%. It went instead to Terre Haute, Ind., where the rate was 5%.

“We were afraid we wouldn’t be able to get the people,” said John J. Mahoney, the company’s executive vice president.

Oracle Corp., the Redwood Shores, Calif.-based software giant, recently decided to open a second software development center in Hyderabad, India, after concluding that the company cannot hire all of the programmers it needs in Silicon Valley.

Despite such problems, however, the healthy expansion of the U.S. labor force--and especially the increased presence of women, immigrants, former welfare recipients and older people in the work force--is having all sorts of positive economic effects, meeting most employers’ needs, helping to raise families’ incomes and easing such seemingly intractable social problems as poverty and dependence.

Women have accounted for roughly 7 million of the 12 million additional workers to enter the labor force during the decade, a flood that has surprised many analysts who had thought the women-to-work trend had topped out. The new arrivals have pushed the proportion of women in the labor force to an all-time high, according to government statistics. Among women in their primary working years, ages 25 to 64, 72.4% had or were looking for jobs by the end of last year, up from 70.2% in 1993 and 33% during the stay-at-home 1950s.

The latest influx of women, particularly working mothers, has played a crucial role in raising families’ incomes in the 1990s, indeed a more crucial role than recent wage increases. More than 60% of the increase in the typical family’s income during the decade has come from “moms making a bigger contribution in terms of more of them working and more working longer hours,” said Paul E. Harrington, a Northeastern University labor economist.

But the flip side of the rise of women’s employment has been a lag in men’s employment that some analysts say indicates a substantial number of people are still lurking in the wings of the current boom.

“There seems to be a group of men who have been left out of this expansion,” said Daniel J.B. Mitchell, a UCLA labor economist and public policy expert. “Some may be structurally unemployed; they just don’t offer the skills employers want today. Others are the archetypical mid-level managers who fell out of the economy in the corporate downsizings of the early 1990s and can’t seem to get back in.”

Immigrants have accounted for one-third or more of the 12 million extra workers to join the labor force in the 1990s, according to estimates based on government statistics.

Whatever the political controversy over immigration, analysts said, the nation has demonstrated anew both its capacity to absorb new arrivals and its tremendous need for them.

Indeed, were it not for immigrants, some regions like New England and the Mid-Atlantic states would have seen their labor forces--and with them, their economic prospects--shrink outright during the 1990s. The West Coast, especially California, would have seen its labor force grow at half or less of the rate that it actually grew.

“If you’re asking if immigrants are important to the California economy, the answer is a resounding yes,” said Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto.

Welfare recipients, targeted for cutbacks by a 1996 federal overhaul, have proved a big source of workers during the decade. Depending on which study you look at, somewhere between 1 million and 1.3 million former recipients are or will shortly be employed.

That’s far short of the more than 2 million adults who have dropped from the rolls since passage of the reform law imposed a get-a-job requirement on most recipients. But even the law’s harshest critics concede that it represents a considerable accomplishment and one that demonstrates a strong economy’s ability to help with social problems that government programs have seemed barely able to dent.

“We are doing better than a lot of people thought we’d be doing because of the economy. We’re not doing better for any other reason,” said Peter B. Edelman, who resigned as an assistant Health and Human Services secretary to protest President Clinton’s decision to sign the 1996 measure.

Older workers have also proved unexpectedly important to the growth of the nation’s labor force, not so much because more have flocked to work as because fewer have decided to leave. In a surprising and largely unnoticed reversal, workers in their 50s and early 60s, who had been retiring at ever-earlier ages, have begun staying on the job often well into their 70s.

“The early retirement trend is over,” declared Joseph F. Quinn, a Boston College economist and fellow at the Employee Benefit Reserach Institute in Washington.

Analysts are still uncertain about what is causing the change: plentiful jobs or structural shifts like longer life spans that leave 65-year-olds with more time and a greater need for money.

But whatever the reason, the results are striking. If the early-retirement trend had continued, there now would be 2.3 million fewer workers in their 60s, according to a recent study by Quinn.

Extending one’s work life might not necessarily be good news personally, but it is absolutely great news for the economy, according to analysts.

If the trend toward later retirement proves durable, it could help ease labor shortages, improve productivity and extend the solvency of the Social Security system.

“You’ve got experienced workers who were getting out earlier and earlier now continuing to work. It has got to help the economy,” said Quinn.

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Hear Times staff writer Peter G. Gosselin discuss the economic trends that have contributed to the boom in U.S. job growth on The Times’ Web site:https://www.latimes.com/jobgrowth

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Charting the Boom

With more Americans than ever on the job, evidence of better times is rippling throughout society. Here are some reasons to welcome the tight labor market.

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U.S. Unemployment Rate

Joblessness among Latinos and African Americans is at its lowest since records have been kept.

March ‘99: 19.5

Tiers of Joblessness

Unemployment has fallen among

most workers with historically high rates of joblessness but remains extremely high among black teenagers:

March ‘99: 42%

Real Earnings

The average worker has finally caught up with 1984 wages in inflation-adjusted terms but still earns less than in 1979. Weekly earnings in 1998 dollars:

Disadvantaged workers Unemployment has fallen but remains extremely high among black teens:

Top 10& earners: $1,197

Overall: $572

Bottom 10% earners: $275

California Unemployment

California joblessness remains higher than the national average, partly because of continued immigration and a mismatch between available workers and the high skills needed:

February ‘99: 26.2%

Employment Growth

The greatest percentage increases in the number of people employed in the last two years have come among the traditionally disadvantaged:

% Change (1996 to 1998)

Single Mothers: 7.3%

Blacks: 7.5%

Latinos: 14%

Young Workers (16-24): 7%

Overall: 3.8%

Sources: Bureau of Labor Statistics; Regional Financial Associates; California Employment Development Department

The March ’99 data for the two U.S. unemployment charts are seasonally adjusted.