This article originally appeared in the Heritage Foundation’s Index of Culture and Opportunity.
The Labor Department’s Job Openings and Labor Turnover data track the rates of job openings, hires, quits, and separations. These data are vital because they measure opportunities to get ahead in today’s workplace. The more job openings and hires, the greater the opportunity to enter the workforce and advance. When the economy is flourishing, the rate of quits (not shown) rises, as people feel confident enough to leave their jobs for better ones.
Job openings and hires have yet to recover from the recession of 2007–2009. These numbers have not yet climbed back to their historical peaks, which they reached in the middle of the last decade.
Job openings as a percent of employment peaked in 2006–2007, at 3.37 percent; the 2013 rate was 2.99 per-cent. Since the mid-2000s, increasing regulations on employers have encouraged them to move away from hiring whenever possible.
To give just one example among many, the Affordable Care Act penalizes employers with more than 49 workers. If employers do not offer the right kind of health care, they can face penalties of $2,000 per worker per year. When the law is fully phased in—and its effects are so damaging that the Administration has repeatedly postponed the employer penalty—firms hiring a 50th worker could be liable for $40,000 in penalties (the first 30 workers are exempt).
Rather than having to pay the higher costs, some employers might prefer to keep their firms small. Others might prefer to invest in labor-saving technology, such as self-checkout machines at drugstores and supermarkets.
Hires peaked in 2005, at 4.39 percent; the 2013 rate was 3.67 percent. The hiring rate is rising more slowly than the rate of job openings, suggesting that the labor market’s problems include both weak supply and weak demand. Job openings reflect only employers’ willingness to hire, while actual hires reflect both that and employees’ willing-ness to work. At the same time, the labor force participation rate declined steadily after 2007, and now stands at levels not seen since 1978.
University of Chicago professor Casey Mulligan, in his book, The Redistribution Recession, has shown that benefits account for half the decline in the labor force participation rate. He examines how increases in benefits, both from broader eligibility and more generous programs, have discouraged people from working by raising marginal tax rates among recipients. As beneficiaries lose their eligibility for benefits by working, the loss of these benefits has the same effect as a tax.
Lower rates of job openings and hires mean that it is harder for Americans to get ahead. Reversing these trends will depend on making America friendly once again to job creation.
Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, directs Economics21 at the Manhattan Institute. You can follow her on Twitter here.
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