Blog Details

Reversing the Declining Workforce Participation Rate Through Mass Customization of Public Policy

We have arrived at Election Day 2016 in a country that remains deeply divided. Efforts to address a major root cause of the division within the country has been drowned out by a toxic, negative campaign and campaign coverage that is long on gossip and innuendo and short on policy substance. When speaking about the economy, partisans “cherry pick” the economic statistics to support their arguments and to demean their opponents. One side touts job creation numbers, declining unemployment and rising wages. The other side points out that a smaller proportion of the population is working than at any time since the 1970’s and that most of the new jobs are menial and low wage. Unfortunately, the national election campaign that could provide an opportunity to meaningfully debate causes and solutions for substantive economic policy issues has failed to do so.

With respect to the performance of the U.S. economy the general consensus seems to be that the economy as a whole has largely recovered from the 2008 recession with respect to job creation and wages are beginning to rise but that everyone has not felt the benefits. The recovery compared to past recessions has been steady but slow. A major concern has been that a significant percentage of people who are in the prime working age group have not reentered the work force. This threatens future economic growth and means that a smaller subset of workers will be supporting a growing subset of those who are unemployed placing greater stress on the social welfare systems and the social safety net.

The percentage of people who are employed in the economy is called the workforce participation rate. There are a range of views that attempt to explain the reasons that this rate is declining . Causes cited include the fact that the population is aging and that as people age they tend to drop out of the workforce. A second cause, especially popular after the 2008 economic meltdown, was that the lack of good jobs caused more people to focus on education and skill development as they waited for the economy to recover. A third cause is that there are more people on disability and unable to work.
In addition to these factors, there are a number of other causes that have led to the anger and divisiveness that is so visible in the electorate. These include the impact of globalization that has led to the movement of jobs from one location or country to another. The mismatch of skills between new jobs being created and the skills of the available workforce is another factor. Another factor is the lack of family friendly policies that make it very difficult for families as they have children to remain in the workforce. Finally, based on the way that in a number of industries that have been significantly impacted by changing technology many former “employees” have opted for or have been forced to become “independent contractors.” It is difficult to determine to what extent this shift has led to undercounting of the people who are actually in the workforce.

It is clear that the reasons for a decline in this single economic indicator – workforce participation rate – are complex and variable from region to region. How do we as a nation address such problems? What is the role of national policy, state policy and local policy? How can we best inform the policy making process?
Former Supreme Court Justice Louis Brandeis is credited with popularizing the concept that within our federal system, states serve as “laboratories of democracy”. The Tenth Amendment of the constitution enables this concept by assigning the responsibility of day to day governance to the states and local jurisdictions. This enables the 50 states to experiment with policies that address their concerns and the knowledge from these state level experiments can be used to inform national policy development.
It is time that we extend this concept further. Instead of a federal system with only 50 “data points” in which the states serve as 50 laboratories suppose we view each community (defined as a town or city or region) as the “laboratory.” In a world in which corporations are increasingly able to utilize technology to enable mass customization of products and services is it not possible for government to adopt this approach to policy development and implementation? With our ability through the internet and social media to disseminate knowledge and utilize predictive analytics these connected communities can serve not as an “internet of things” but as an internet of “connected systems” to address social, economic and environmental policy issues.

Mass customization of public policy would be the ultimate democratic dream. However, to turn this dream into a reality requires building distributed networks of connected communities. Doing this requires that each node of this network is built on a framework at the local level that enables the community to operate as a learning system. In his new book, Growing Jobs: Transforming the Way We Approach Economic Development , Dr. Tom Tuttle describes the outline of such a framework. He discusses the framework in the context of job creation at the local level. However, while job creation is one outcome, his discussion has a more systemic perspective when he points out that job creation cannot be successful over the long term if it does not occur in conjunction with community development. This community development focus results from the creation of a broad-based, local development organization consisting with representation from business, government, education, organized labor and not-for-profit organizations. His discussion also describes how these local development organizations can achieve the desired and essential linkage between local communities and state level policy development.

How does this help solve the puzzle of declining workforce participation? First of all, it makes that case that a critical element in the solution must be the engagement of local communities in order to learn how the issue of declining workforce participation manifests itself at the local level. Is it a really a problem? What are the root causes? Which of these causes can be addressed locally, and which require policy support and resources from state or national systems. If each community in the nation can be engaged to take on this task in a systemic way, not only can the country engage each community in the solution, but knowledge can be created that enables state and national policy to be established that is more data driven. If this strategy can be applied to address the problem of workforce participation can it not be applied to address other vital public policy challenges? Mass customization of public policy is an idea whose time has come.