Left Behind: Missing from the Labor Market in New York State
A reader of this blog recently wrote, “We know that labor force participation rates across the country have declined noticeably for a number of years, and many economists have warned of the troubling implications of this. Such rates across Upstate NY have declined as well, and in most cases are significantly below the national average – not an encouraging sign. In the North Country and the Mohawk Valley, they are not much above 50%, and in some other Upstate regions just a couple of percentage points higher. Clearly some of this indeed is because people have not been able to find jobs, and thus have left the labor force. I don’t think a low unemployment rate necessarily indicates that “Upstate’s problem is not that its residents cannot find jobs.”
Low rates of labor market participation might indeed show that people are dropping out of the job market because of limited opportunities. But, other factors are at work as well, including the aging of the population. This post reviews labor market participation data in New York’s counties to understand changes over time and how low participation counties differ from those with higher participation rates.
A recent Brookings Institution study, “What we Know and Don’t Know about Declining Labor Force Participation: A Review” points out that: “This steady decline in prime-age male participation rates and recent stagnation of prime-age female rates has adverse implications for national economic growth and individual well-being. Workers between the ages of 25 and 54 tend to be at their most productive, so these trends affect economic growth as well as individual income. Further, as discussed below, lower work rates might be contributing to the decline in marriage and to poorer health and psychological well-being, possibly leading to an increase in premature deaths among certain populations.”
A significant part of the decline is explained by the aging of the population, as older workers move into retirement. John Robertson and Ellyn Terry of the Atlanta Federal Reserve Bank report that “In 2007, about one in five Americans were over 60 years old. In 2015, almost one in four were over 60. Moreover, this demographic force will continue to suppress the overall LFPR as the share of older Americans increases further in coming years.”
But, labor force participation has declined overall. The Bureau of Labor Statistics reported in 2016 that, “From 2000 to 2015, most of the major demographic groups saw a decrease in labor force participation. Teenagers experienced the largest drop in participation, which coincided with a rise in their school enrollment rate. Young adults 20 to 24 years also showed a decline in labor force participation, but the decrease was not as steep as that for teenagers. The labor force participation rate of women 25 to 54 years also fell, with the decrease more pronounced for women who did not attend college. The labor force participation rate of men 25 to 54 years continued its long-term decline. As in the past, the decrease in participation among men with less education was greater than that of men with more education. However, labor force participation rates of men and women 55 years and older rose from 2000 to 2009 and subsequently leveled off.”
The causes of the decrease in labor force participation for prime age people include both the demand for workers and the supply of labor. On the demand side, technology and trade have reduced the demand for low skilled manufacturing workers. The disparity in demand for workers at low and high skill levels has increased, because technology has led to greater demand for workers with technical and managerial skills. On the supply side, the Brookings Institution study points out that “the problems include not only a lack of skills but high reservation wages [the wage levels at which people are willing to accept jobs], poor health, and the availability of disability insurance or other forms of unearned income.”
Labor Force Participation in New York State
In this post, I look at differences in the labor force participation level between counties in New York State. Because the economic performance of the New York City Metropolitan area has been stronger than upstate New York since 2000, participation in the two regions is examined separately, where relevant.
This analysis is at the county level, and does not show differences in participation based on levels of economic disadvantage below the county level, particularly in urban centers where participation may also be low.
The data shows that while changes in labor market participation from 2005 to 2015 in the New York Metropolitan area, and in larger upstate metropolitan areas did not differ much from the nation as a whole, smaller metropolitan areas and rural upstate had greater declines than the nation. Comparing county performance in 2015, large differences were found in the educational attainment of residents of better and worse performing counties. The percentage of college graduates in the populations of the 15 counties in New York State was more than double that found in the 15 counties with the lowest level of participation. The behavior of residents within particular socio-economic groups in counties with high and low labor market participation varied as well. Disproportionately lower percentages of people who did not complete high school, residents who were black or Hispanic or male, and residents who were 25 and 34 years old and 55 and 64 participated in the labor market in counties where labor market participation was low.
Data is from the Census Bureau’s American Community Survey. The Census Bureau data differs from the Bureau of Labor Statistics data referenced at the beginning of this post in its methodology and sample selection. The differences in methodology are discussed here.
In this post, I use two different data samples. Beginning in 2005, county level labor force participation data is available from the Census Bureau’s American Community Survey. The sample used for the section titled “Change over Time” is from single year samples of one percent of the United States population. The single year samples are too small to permit an analysis of data for small population units. Consequently, only 37 of 62 counties in New York State are included. Because the sample is relatively small, estimates of smaller county characteristics can have relatively large errors – as much as 2.5% for labor force participation for the entire population, and as much as 5% for some groups within the overall population.
In the section “Comparison of Labor Force Participation at the County Level in 2015” I use a five-year sample of the population that includes 5% of the United States population. Because the sample is larger, it includes all New York counties, and has less sampling error. Smaller county estimates are likely to be within 1.3% of the true value. Estimates of groups within the overall population should be within 3% of the true value. But, because the data is an average of five-year data, it lags trends, since the midpoint for the time period covered for the 2015 five-year data, which includes surveys from 2011 to 2015, is 2013.
Because differences in labor force participation between counties are relatively small, it is important to recognize that their relative performance can vary from year to year because of sampling error. For example, Schenectady County’s labor participation rate was reported as 63.7% in 2014, 61.7% in 2015, and 64.7% in 2016. That kind of variation could reflect sample variation around the true participation level.
Change over Time
The tables showing change over time between 2005 and 1026 are based on the American Community Survey data for a single year. Counties in the New York Metropolitan areas saw relatively wide variations in the change in the level of labor force participation between 2005 and 2016. For example, Kings County (Bronx) saw an increase from 59.7% to 63.9% over the period, while Dutchess County saw a decrease of 6.2% from 68.4% to 62.2%. Two thirds of the counties in the metropolitan area did better than the national average, based on the American Community Survey sample data.
Three quarters – nine of twelve counties in the New York metropolitan area had participation rates that were higher than the national average in 2016, compared with seven of twelve in 2005.
Census Bureau’s American Community Survey 2016 one year data includes 26 of 50 counties outside the New York Metropolitan area.
In upstate New York, larger metropolitan counties, like Monroe, Schenectady, Saratoga, Albany, Niagara and Erie County had smaller percentage labor force participation losses between 2005 and 2016 than did the nation . Others, like Rensselaer County, Onondaga County and Cayuga County were near enough to the national average to be within the margin of error of the national estimate.
Many small upstate counties had larger declines than the nation as a whole. Decreases in Broome County (5.8%), Ulster County (5.9%), St. Lawrence County (6.1%), Oswego County (6.2%), Chautauqua County (6.5%), Clinton County (6.7%), Ontario County (8.3%) and Sullivan County (9.9%) were all more than twice as great as the national average. It is also important to note that all of these counties had participation rates in 2015 that were significantly lower than the national average. Chautauqua County was lowest at 55%. Seven upstate metropolitan areas had participation rates that were greater than the national average, compared with 18 that were below it. In 2005, eight upstate counties had participation rates that were higher than the nation as a whole, and 17 were below.
Comparison of Labor Force Participation at the County Level
The American Community Survey five-year sample from 2011 to 2o15 used in the following section has a margin of error of approximately plus or minus 1.3% for counties, so differences of that size between counties should not be viewed as significant. Because this data has a different time period (2011 to 2015) and sample size, the numbers differ from the discussion of change above.
Nationally, 63.7% of people 16 years old or older were in the labor force in 2015. In New York State, participation in 2015 ranged from 67.6% in Putnam County, where 67.6% were in the labor force, to 50.8% in Hamilton County. Overall, participation levels were higher in the New York metropolitan area (65.3%) than in upstate counties (60.0%).
Two of five counties in New York City (New York, and Queens) had participation rates in 2015 that were above the national average, while three had rates that were below (Kings, Bronx and Richmond). Suburban counties in the New York City Metropolitan Area were above the national average.
Upstate, larger metropolitan counties, including counties around Albany-Schenectady-Troy, Rochester, Syracuse, and Buffalo-Niagara Falls, had labor participation rates that were higher than or within their margin of error compared with the national average. Smaller urban areas upstate, like Utica-Rome (59.4%), Binghamton (58.7%), Jamestown (58.1%) and Elmira-Corning (56.9%) and rural counties generally had participation rates that were below the national average
Factors Related to Labor Force Participation Rates
Census data includes a number of factors that show significant relationships with levels of labor force participation. Among the more important are:
At the individual level, education is a significant predictor of labor force participation. People with a bachelor’s degree or higher are 27% more likely to be employed or seeking employment than those with have not graduated from high school.
- Education: Population Characteristics
In 2015, there were large differences in educational attainment in the 15 counties with the highest labor market participation and the 15 with the lowest participation. Counties with high levels of participation had 15% fewer people whose highest level of educational attainment was high school graduation than did counties with low levels of participation. Counties with high levels of participation in 2015 had 24% more people who had attained a Bachelor’s degree or higher than did the 15 counties with the lowest participation levels.
- Labor Market Participation at Each Level of Educational Attainment
Comparing the top quarter of counties ranked by labor market participation with the bottom quarter, the largest divide in participation is for people with less than a high school degree. On average, only 41% of those with less than a high school diploma were labor market participants in 2015 in the lowest quarter of counties ranked by participation. In the quarter of counties with the highest participation levels, 62% of those with less than a high school diploma participate. At the opposite end of the educational spectrum, the difference in labor market participation levels for those with a Bachelor’s degree or more was only 3.3% – 87.1% vs. 83.3%.
Like education, age is related to labor market participation at the individual level. Young (16-19 years old)and old (60+) people participate at lower rates than workers of other ages. As a result, it is not surprising that counties whose populations have higher percentages of older people have lower labor participation rates than counties with younger populations.
- Age: Population Characteristics
This section compares labor market participation levels for two age groups: younger workers aged 25-44 are in age groups that show the highest levels of labor market participation overall, and older people, aged 55+ who are beginning to leave the labor market. The differences in the size of the older compared to the younger age group in the top 15 and bottom 15 counties are relatively small – in the top 15 counties, people between 25 and 44 make up 5% more of the total population than in the bottom 15 counties. Older people, aged 55 or more, are 4% more of the total population in the lowest 15 counties than in the highest 15 counties.
- Labor Market Participation at Each Age Range
Comparing labor force participation with age for the highest quarter of counties vs. the lowest quarter shows that participation levels differ most for those between 25 and 34 and for those who are 55 to 64 – in those cases the difference between participation levels is more than 10%.
- Labor Market Participation: Men vs. Women
Statewide, 81.4% of men and 72.8% of women were in the labor force in 2015. Although difference between the labor participation rate of women living in the top quarter of counties ranked by labor participation compared with the lowest quarter of counties was 4.9%, the difference in participation rates for men in high versus low participation rates was much larger – 13.9%.
For this analysis, the state has been separated into the New York City Metropolitan area and the rest of the state, because of significant differences in the levels of black/Afro-American and hispanic labor participation. Because the number of black and Hispanic residents of low participation counties New York City Metropolitan Area is quite small, the comparisons presented here are between the top half of counties by labor market participation and the bottom half.
- Race and Ethnicity: Population Characteristics
In the New York City Metropolitan area, the top half of counties ranked by labor market participation had populations in 2015 aged 16 or over that were 52% white, compared with 34% white for the lower participation counties. High participation counties had 8% less black/Afro-American residents and 4.5% less Hispanic/Latino residents.
Upstate, the top half of counties ranked by labor market participation in 2015 had populations in 2015 that were 82% white, compared with 87% white in lower participation counties. Blacks/African-Americans comprised 4.4% more of the population aged 16 or more in higher participation counties than in lower participation counties.
- Labor Market Participation: Race and Ethnicity
In the New York City metropolitan area, participation rates for blacks/Afro-Americans, Hispanics and whites were similar in the low and high participation counties in 2015. The difference in labor force participation in high and low participation counties was only 3.1%. For black/Afro-American, participation is 63% in both high and low participation counties. Hispanic and white residents participated more in the labor market in high participation counties by 3% and 4% respectively.
In upstate counties, the picture differs. White labor market participation in high participation counties was 5.3% higher in 2015 than in low participation counties. Hispanic labor market participation was 14% higher in high participation counties than in low participation counties. For black/African-American residents, the difference was 25% in 2015, with participation averaging only 34% in low participation counties, compared with 59% in high participation counties.
In the New York Metropolitan area, county populations aged 16 or over are large – averaging 650,000 for high participation counties, and 1.1 million for lower participation counties. Additionally, the range of labor participation levels in the New York Metropolitan area was relatively small in 2015, and participation levels were higher overall than upstate. In fact, the participation rate for the lowest county in the New York Metropolitan area – Staten Island – was within 1/10th of one percent of the average for upstate counties.
The range for upstate counties was much larger. Saratoga County’s participation rate of 67.6% was the second highest in the state, while Hamilton County’s was 50.8%, almost 9% lower than the lowest county in the New York Metropolitan area. In Upstate New York, labor force participation is higher in large metropolitan areas than in small ones. This finding suggests that areas with smaller populations do not provide the opportunities for employment that are offered by larger ones.
Participation Differences Resulting from Differences in County Population Characteristics
Two characteristics showed consistent differences between counties with low and high participation levels – education and age. Of the two, educational attainment showed much larger variations between counties with high participation levels and those with low levels of labor market participation. The difference in the percentage of residents with college degrees or more is particularly striking: 45.4% in the 15 counties with the highest levels of labor market participation, and 21% in the 15 counties with the lowest levels. In contrast, 35.5% of residents in counties with low participation levels had ended their education at high school graduation, while 21% of those in counties with high levels of participation had only graduated high school, a difference of 14%.
A portion of the variation in the educational attainment of residents between counties is likely to be a result of the differing levels of educational levels of educational attainment of young adults who were raised in those counties. Another part stems from migration patterns of young people seeking and finding first jobs inside and outside their home counties. Determining the relative contribution of each factor is beyond the scope of this research.
It was expected from previous research that counties having a higher proportion of older residents would have lower participation levels than those with younger residents. But, the differences found in counties in New York State were less significant than those for educational attainment. The percentage of residents aged 25-44 was about 5% higher in high participation counties than in low counties, while the percentage of those 55 years old or older was 4% less.
Differences in Participation within Groups in High and Low Participation Counties
There were also significant variations in labor market participation within groups in high and low participation counties. Among the more notable were:
- Much lower labor market participation by people who did not complete high school in the 15 lowest participation counties, compared with the highest participation counties – 41% vs. 62%.
- Significantly lower participation by workers aged 25 to 34 and 60-74 in low participation counties: differences exceeded 10% between the bottom and top quarter of counties sorted by labor participation.
- Much lower participation by males in the 15 lowest participation counties, compared to the 15 highest (14%) than by females (5%).
- Very large differences in participation levels for black/Afro-American residents and Hispanic/Latino residents between upstate counties with low and high labor participation levels – 25% for black/Afro-American residents and 14% for hispanic residents.
Differences in participation within groups between counties that have low and high labor participation levels at least partially reflect the hypothesis that people have been unable to find jobs and have left the labor force. But beyond that, the data shows that some groups are much more likely than others to be absent from the labor force in low participation counties. These include people with little education, men, young and old workers, and blacks and Hispanics. The low levels of participation of these groups in low participation counties probably reflect reinforcing factors, like lower average levels of education among minority group members, the decline of manufacturing industries that employed low skilled men, and low levels of demand for workers without college educations in places where there are relatively few jobs available.
These differences are not present in the New York City metropolitan area, where most counties have relatively high labor market participation levels, or in larger upstate metropolitan areas, like Buffalo, Rochester, Syracuse and Albany, but they are significant is smaller urban areas like Utica, Binghamton and Elmira, and in rural areas of New York State.
To the extent that New York’s development policies can be based on need, one focus should be on upstate’s small urban areas and rural communities. If smaller counties are to see more labor market participation by their residents, the state must help them address the barriers that have discouraged participation by less educated people, men, blacks/Afro-Americans and Latinos, and find ways to generate jobs that retain college graduates. At the same time, policy makers concerned about the well-being of New York residents must recognize that some policies that would help residents of low participation counties access jobs could increase out-migration to locations with more employment opportunities. The ability of low participation counties in small metropolitan areas and rural locations to create the resources needed to diversify their economies to include occupations that match the qualifications of residents are likely to be limited, because of the significant advantages offered by locations that have larger labor pools.