Reporting in the Washington Post this week (January 23, 2007), Robert Kimmitt of the US Treasury points out that 55 million Americans left their jobs last year. Kimmitt also notes 57 million people were hired during the same period. Praising this so called “churning” of the labor market, Kimmitt suggests this is a sign of a healthy economy because it reflects the movement of people in response to opportunity. From the Job Openings and Labor Turnover Survey (JOLTS), he notes that the 12 months ending in November 2005 had the highest average level of labor turnover since the U.S. government began tracking this information in 2000. To what extent is this churning the result of people acting in response to opportunity? Does everyone end up better off or is there a down side to this churning? Is some of the “churning” the result of involuntary movement out of a job and into the labor market in search of a new one? Is it the case that for some workers swimming in the churning American labor market ends up being a tumultuous experience leading to a decline of their standard of living? Kimmitt speaks of the upside, but is there also a downside to this process of churning? According the Bureau of Labor Statistics data on layoffs and plant closures, in rural areas particularly, churning is liable to result in long periods of unemployment, forced shifts to other industries and lower wages once the tumultuous journey is over.
Job losses are mounting in communities where low-skill employment has dominated the economy. Nationally, the number of jobs lost due to displacement has increased significantly since the late 1990s. From 1997 to 1999, 3.3 million workers lost jobs, but from 2001 to 2003 the number had increased to 5.3 million. Over the entire six year period more than 9.3 million workers were displaced. The rate of displacement–that is, the share of displaced workers relative to the workforce as a whole–went from 2.4 percent in the 1997 to 1999 period to 4.0 percent in the 2001 to 2003 period. It increased across all categories–gender, race, age, education, and household type. One-third of all jobs lost due to displacement in the 2001 to 2003 period were in manufacturing. Forty-two percent were held by people with a high school education or less.
As in urban parts of the country, low-skill workers in rural America are the most vulnerable to displacement caused by increases in productivity and international competition. According to the U.S. Department of Agriculture’s Economic Research Service (ERS) just slightly less than half (42 percent) of rural jobs are low-skill: that is, they are less complex and require less formal education Though the share of rural jobs that are low-skill is declining, the proportion remains higher than in urban areas, as it has been historically.
From 1997 to 1999, 637,000 rural workers were displaced. In the 2001 to 2003 period the number increased to 800,000. Over the six-year period 1.5 million rural workers lost their jobs. Less educated rural workers were more likely to be displaced; workers with a college degree lost their jobs at half the rate of those with only a high school education. These two facts vary by region.
Similar to the nation as a whole, the workers who were hardest hit were those in manufacturing. Nearly half of all rural jobs lost because of displacement were in manufacturing (47 percent), compared with about one-third in the nation as a whole. The biggest losses are experienced in the US South where jobs in the textiles and apparel industries, furniture, and auto parts have been especially vulnerable to international competition and the effects of automation.
So if you end up in the river and are able to make it to the other side, are you met with the same conditions you entered the river to begin such as a job with the same benefits and wages? Where Kimmitt’s argument falls short is ignoring the transactions costs associated with shifting jobs. As anyone who has ever lost a job knows, reemployment rates totally depend on the condition of the economy you are swimming in when you join the ranks of the churning masses.
Workers displaced over the 1997-2003 period were likely to be unemployed after being displaced. Across regions, in 20012003 there was a substantial increase in the percent of displaced workers who were unemployed.
Further, over the 1997-2003 period, the length of time between jobs increased. In all regions the percentage of displaced workers who were reemployed in six or fewer weeks declined over time. The percentage of workers who remained out of work longer than 40 weeks also increased substantially through time. For rural workers the length of time out of work was 20 longer than for urban workers.
Upon displacement, rural compared with urban workers were less likely to be reemployed over the period of study. Rural workers experienced higher rates of unemployment compared with urban workers and were more likely to leave the labor force compared with workers in urban areas. Urban workers were more likely to work part- versus full-time compared with rural workers; urban workers also were more likely to work full-time compared with rural workers. In the South, the total absence of reemployment alternatives meant 20 percent of displaced workers left the labor market entirely over the period examined.
Finally, Kimmitt implies that the results of churning can be positive– and that is no doubt true for some workers in some industries and in some locations. But, overall at least between1997-2003, the most recent data we have, workers displaced across regions and in urban and rural areas experienced a decline in the wage levels received upon reemployment. Rural workers were more likely to receive a wage less than that provided in their previous employment compared with urban workers. Rural workers in the Midwest and South were more likely to experience a decline in earnings compared with rural workers in other regions.
If churning is the price we pay for working in America, how can the pain and insecurity of this prospect be lessened? These problems require a comprehensive approach to rural development policy that includes:
Investing in comprehensive education and training in rural America;
Pursue economic development strategies that go beyond business recruitment;
Provide humane transition assistance so workers who are thrust into the raging river don’t lose everything they own and have previously worked for before they are reemployed.
Policies must focus on community-based approaches. Displacement requires a full community response and nothing less will do.
Abstracted from: “Low Skilled Workers in Rural America Face Permanent Job Loss.“ Amy Glasmeier and Priscilla Salant. The Carsey Institute, Policy Brief No. 2. University of New Hampshire.