“Labor Force Participation” Exemplifies The Foolishness Of Economic Statistics

“Labor Force Participation” Exemplifies The Foolishness Of Economic Statistics

Authored by John Tamny via RealClear Wire,

David Thayer is a prominent investor in Philadelphia who formerly served in the military. It’s something he noticed while serving in the military that will be the subject of this write-up.

Thayer was sent to Bosnia at the height of the country’s troubles in the 1990s. Upon landing in the poor and war-torn country, he came across a statistic indicating a level of unemployment in Bosnia that reached well into the double digits. The only problem was that the stat was visibly absurd. As Thayer recalls, every Bosnian was working and the work had an all-the-time quality to it.

What Thayer witnessed in another life came to mind while reading a recent Associated Press report from Afghanistan. The title of the article said it all: “For many poor Afghan kids, school is not an option.” Thayer would understand.

Poverty is rampant in Afghanistan, which means everyone is working. According to the AP report, “Nabila works 10 hours or more a day, doing the heavy, dirty labor of packing mud into molds and hauling wheelbarrows full of bricks.” Nabila is 12 years old, and at 12 is thought to be the oldest of her co-workers. She’s been working in brick factories roughly half of her life.


Such is life in poor countries. Where poverty is immense, the work is never-ending. It’s as simple as that, which is the point. Or should be the point.

This is something to keep in mind when politicians promise to “create jobs,” or they talk about policies that will “create jobs.” They come off as not terribly wise. If job creation were the goal, the solution would be simple: just abolish the internet, cars, and fuel consumption. Everyone would be working, though life would be defined by unrelenting drudgery. We’re talking sheer misery that includes lots of kids working from an early age ahead of a not very long, and not very healthy life.

The simple, rather obvious truth is that the labor force participation rate is logically highest in the poorest parts of the world, and lowest in the richest parts of the world. Remember this the next time you see some self-serious PhD. on CNBC droning on about labor force participation, and bashing this president or that president for overseeing a decline in the rate.

The reality is that low labor force participation is an effect of prosperity. Where growth and soaring wealth inequality are the norm, so is choice about how much to work; including the choice about not working at all.

Where prosperity is abundant it’s frequently the case that mothers or fathers opt out of work of the “job” variety so that they can be home with the kids. As for the kids, work is a distant object made distant by years of schooling, including the four-year party that some refer to as college. While learnedness is a choice made by the educated and uneducated alike, let’s call school and education one of the many brilliant options that is a consequence of wealth creation.

Crucial about wealth creation is that it’s always and everywhere the result of job destruction. Yes, you read that right. It’s where jobs are being destroyed the fastest that prosperity is greatest. Think about it.

What is one of the most powerful constants of prosperous societies? It’s the mechanization of everything. Entrepreneurs frequently become staggeringly rich entrepreneurs by automating work formerly done by humans. What can’t be stressed enough is that this automation doesn’t create breadlines as much as it frees humans to specialize their labor in ways never imagined, and in specializing their labor, it renders their labor much more productive. Translated for those who need it, where automation is most prevalent is logically where compensation is greatest.

The above scenario explains why parents can more often than not just be parents, and why kids can be kids. They don’t work because they don’t have to, and they don’t have to because increasingly productive work of one parent pays the bills for Mr. Mom, or Mrs. Mom, plus schooling for the kids. It’s a beautiful thing.

What’s not beautiful is the life being led by Nabila. She once again works because she has to, and because she has to she doesn’t get to be a child. None of this means that she’ll never be learned, but it’s no exaggeration to say that her ability to pursue a life of knowledge will be severely limited by work that is never-ending, and it’s never-ending because there’s a shortage of the wealth unequal in Afghanistan. Where the wealth unequal are scarce, work is necessary in order to live much less than well.

It’s once again something to think about when politicians reduce life to “job creation” and “labor force participation.” They come off as clownish, and not very learned.   

Tyler Durden
Tue, 10/04/2022 – 11:40

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