What Mississippi’s low labor participation says about our economy

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Eric J. Shelton, Mississippi Today

Virginia Mayes searches for jobs at the Jackson WIN Job Center Thursday, July 26, 2018. Mississippi had a labor participation rate of 55.9 percent this past June.

Earlier this year, Mississippi recorded the lowest unemployment rate on record for the state, at 4.5 percent. Gov. Phil Bryant echoed the achievement at the Neshoba County Fair on Thursday.

“Mississippi has unemployment levels near the lowest recorded rates in state history. I came into office with it over 9 percent and now we are sitting at 4.7 percent,” Bryant said via Twitter during his speech.

Yet that number doesn’t paint the entire picture of the state’s economic health. While the amount of people in the workforce are finding work at a high rate, the size of the workforce itself is, and has been, relatively low compared to other states.

In June, Mississippi had a labor participation rate of 55.9 percent, the lowest of any state besides West Virginia (54 percent), according to the Bureau of Labor Statistics. The statistic refers to the number of people in the labor force who are either working or looking for a job, divided by the civilian, non-institutionalized population, ages 16 years and over. In other words, just over half of the state’s eligible workers are active in the economy.

Corey Miller, an economic analyst with the University Research Center, a division of the state Institutions of Higher Learning, said that a low labor participation is “a sign that our economy is not performing as well as other states.'”

“In terms of impact on our economy, that tends to be associated with a lower gross domestic product and lower tax revenues, because we’ve got a lot of these people who aren’t really participating in the economy,” he said.

In terms of the annual average, Mississippi’s participation rate has dropped, for the most part, since 1995, when it peaked at 63 percent. The state’s rate has been below the national annual average for each year since 1974, the start of BLS’ data.

Pete Walley, a retired state economist, said the low rate is a reflection of both the state’s workers, or “human capital,” and the jobs available.

“It’s an indication of the capacity of our labor force,” said Walley. “Now you immediately say, is it a chicken or a egg? Do you have better labor and you get a better set of jobs, or do you get better jobs and then that brings the labor up? And the arrow probably points both ways.

“(The participation rate) is an indicator of the aggregate human capital of the state. What it really says is people don’t have the skill set to participate in, particularly, the economy we’re in now.”

According to Mississippi Works, there were 40,234 jobs available around the state as of July 27, a favorite talking point of Gov. Phil Bryant who touts the state’s low unemployment rate each month a new jobs report is published.

Scott Waller, President and CEO of the Mississippi Economic Council, emphasized the value of training programs in matching people with suitable jobs.

“It’s extremely important that we improve our workforce,” Waller said, “When you have that low of an unemployment rate, and that many jobs available, we need to make sure we’re focusing on getting the training for our citizens to allow them to be productive citizens in our workforce. That’s the bottom line. There are jobs available, and if we’re going to attract more jobs we have to make sure we have the workforce in place to do that, and that begins with making sure we have workforce training programs that are focused.”

Walley, however, cautioned that government training is often a step behind in terms of teaching skills for a future workforce.

“We’re on a really, really fast treadmill now, and that implies no matter what the government sector does in trying to prepare you, they’re always behind the curve,” he said. “They’re looking at what just happened and saying, ‘Let’s get ready for that,’ but it’s already passing them. I’m saying you’ve got to be looking ahead.

“There are a whole bunch of theories about what artificial intelligence and robotic machines are doing (to the economy), but generally speaking, they’re going to provide about the same number of jobs that they’re weeding out. And that is, you’ll have to have programmers and people keeping (machines running), but those are higher-skilled jobs than someone who was just standing on a manufacturing line.”

Walley also pointed to large manufacturing employers in the state, such as Nissan and Toyota, to describe the “human capital” in Mississippi.

Eric J. Shelton, Mississippi Today

Nicholas Evans, branch director of Mississippi Department of Employment Security, assists Virginia Mayes as she searches for jobs at the Jackson WIN Job Center Thursday, July 26, 2018. According to Mississippi Works, 40,257 jobs are available in the state.

“The real issue to me is, in economics you’d say why don’t (employers) raise their wages a little bit to entice more people?” Walley said. “And then you get caught in that economic bind of, ‘Can I make a profit?’ In the labor sense, (the employer) is bound in by the ability to sell their product for a price that reflects what that labor’s worth.

“In Mississippi, we don’t pay as good (compared to other states), and that’s a reflection of the human capital. Why do you think Nissan came here? Businesses go where they can get the best labor for the lowest cost.”

So why are Mississippi’s human capital and labor participation rate lower than other states? Miller, of URC, named a few reasons.

“We know the factors that cause people not to be in the labor force, and we know there are more of those in Mississippi than in other states,” he said. “Disability is one of them. We know Mississippi has lower rates of high school and college attainment degree than the nation as a whole, so that’s probably attributing to it. Other factors are race; for whatever reason, we know that black men have a lower participation rate than other groups.”

Walley agreed with Miller, adding high poverty and incarceration rates as contributing factors.

In Mississippi, the nation’s poorest state, African-American men also make up 59 percent of the inmate population, according to the Department of Corrections, despite representing just 18 percent of the total population.

Using scatter plots, the data below shows how much of a correlation, if any, exists between those factors and the labor participation rate.

Poverty rate and disability recipients both have strong negative correlations (both at 72 percent) with labor participation, meaning the higher those factors are the lower the participation rate. High school graduation rate has a strong positive correlation (71%) with the participation rate. As the charts also show, there is a slight correlation with the incarceration rate, and very little correlation with the African-American male population.

While MEC’s Waller believes workforce training programs can help boost the participation rate, he recognized Mississippi needs a new strategy, citing a quote on his refrigerator: “Something has to change for something new to happen.”