Nika Stewart's small business has what sounds like a problem: "I have people on the payroll that I rarely see in person," she says. But she knows her employees work hard. Her Freehold, N.J.-based social media management company, Ghost Tweeting, has gone from zero to about 75 clients in less than two years.
She doesn't see her team members because "almost everyone who works for us is a mom," and telecommuting, with flexible hours, is what makes work possible for them. Because she's fine with the concept, she gets great talent at a good price.
It's an intriguing idea, and one that more people concerned about America's economic future should keep in mind. While most people focus on the unemployment rate -- which remained at 7.8% in December -- the more interesting trend is in labor force participation. The percentage of people older than 16 working or looking for work has been declining for the past 12 years. Many economists blame demographics. Baby Boomers are retiring. Women's participation has plateaued. There are reasons for both trends, but also implications: When fewer people work, this hurts long-term growth, nudging us closer to 2% annual increases vs. the 3% we've long enjoyed.
A shrinking labor force, though, is less inevitable than it seems. Changes in how people work could slow, or even reverse the shrinking, if we choose to embrace them.
Since the middle of the 20th century, workforce participation has fluctuated. In October 1950, 59.4% of Americans over age 16 were working or looking for work. In October 1970, 60.4% were. Then, over the next three decades, the bulge of the Baby Boom poured into the workforce. The rate rose to 67.3% by early 2000.
The decline in participation since then -- to 63.6% last December -- means the U.S. economy has given up roughly half the gains since the 1960s. Some of the decline is due to the lousy job market. But in a March report, Barclays economists noted that two-thirds of those who've left the workforce say they do not want a job. They are often north of 55 and call themselves retired. Some are not the family's primary breadwinners (participation among mothers with kids younger than 6 fell from 65.3% in 2000 to 63.6% in 2008).
But as Heidi Shierholz of the Economic Policy Institute says, there's a "much more fluid line between workers and non-workers" than we think. People who are not looking for jobs as we normally think of jobs might work under different conditions.
Take Stewart's employees. If having a job meant commuting to an office for 40 hours per week, they wouldn't be in the labor force. But because it doesn't, their skills are employed in economically useful ways.
Or consider military spouses. About 50% of military spouses participate in the workforce vs. more than 70% of civilian spouses. Frequent moves make normal jobs difficult. But if more businesses embraced telecommuting, many productive people could get in the game.
Sara Sutton Fell, owner of FlexJobs, which specializes in non-traditional jobs, has hired military spouses, including one who telecommutes from Germany.
And then there are retirees -- the biggest reason for the labor force participation drop. Some senior citizens would like to work, at least part-time. One McKinsey survey of retirees found that 40% had left the workforce earlier than intended, at an average age of 59, often for health reasons. Virtual work can accommodate seniors with physical challenges.
Indeed, because most employers still think of jobs as on-site-type things, the economy has largely forgone the contributions of people who can't fit that mold. Fortunately, this is changing -- albeit slowly. Census data show that the number of Americans working from home has grown 41% in the past 10 years.
In the long run, as the economy slowly returns to health, reaching our full potential depends on a critical mass of employers getting their heads around the same idea.
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