Afternoon Must-Read: Binyamin Applebaum: On the Decline in Labor Force Participation: Long-Term Trends in Economy More Worrisome Than Sudden Crash – NYTimes.com

Binyamin Applebaum: On the Decline in Labor Force Participation: “Davis and Haltiwanger attribute… to the aging of the work force…

…as people get older, they tend to change jobs less frequently. The decline in the creation of new companies is also playing a role. In effect, companies are getting older, too. This has been particularly pronounced in the retail sector, where giants like Walmart and McDonald’s offer relatively stable employment…. The cost of training workers has increased, partly because the share of all workers who require government licenses has grown by one estimate from about 5 percent in the 1950s to 29 percent in 2008. This discourages hiring. So do legal changes that have made it more difficult to fire employees…. It also mentions health insurance as a reason that employees may stay put. In the view of Mr. Davis and Mr. Haltiwanger, the recession just made a bad situation worse….

But economists and policy makers will have to reconcile the assertion that these trends were the dominant factors with the reality that the employment rate rose in the years before the recession, then dropped sharply during the recession. The new paper, like others of its genre, basically requires belief in a big coincidence: that a short-term catastrophe happened to coincide with the intensification of long-term trends — that the economy crashed at the moment that it was already beginning a gradual descent.