THE SAUDI FLAW

We blame the Islamic Arab world – and in particular the Kingdom of Saudi Arabia – for denying a good part of its population, the women, an equal role in building the future of their countries and we wonder how in this day and age a nation can prosper if it leaves a large percentage of its population on the sideline.

The answer is more likely than not that it cannot prosper under those conditions. It can stay afloat for a while, particularly if the nation is a hydrocarbon rich country that can generate wealth by exploiting its natural resources. But it is unlikely that it can reach its full potential if not the whole population is engaged in the nations building process.

In the USA we don’t have that problem. Or do we?

Warren Buffett just recently made a case* for women to shatter what- he believes- are mostly self-imposed limitations on themselves. He blames these limitations on lingering after effects of centuries of institutional inequality between men and women. There is more than symbolism in the fact that our Declaration of Independence declares “all men are created equal”.

Warren Buffet writes: “The closer that America comes to fully employing the talents of its citizens, the greater its output of goods and services will be.”

Arguably, the contribution of women in our society can be enhanced by removing any and all remaining vestiges of a time we should finally leave behind. This is particularly the case with women’s opportunities at the top levels of business and government, where women remain significantly underrepresented in spite of great progress over the last decades. But there is a whole other segment of our population that we should focus on if we believe that “running on all cylinders” is a prerequisite for success in the race to the top of nations. And this segment is by and large equally divided between men and women.

First of all, we need to realize that nobody counts the number of people employed in the USA. The Federal government through the Department of Labor makes an effort (not very successful) to measure the unemployment rate, but what would be really interesting to know is the number of people who are employed (and by deduction, the number of people who are left out of the labor process).

Isn’t it somewhat befuddling that our government cannot tell us what percentage of the population is engaged in the labor process? And, therewith, the percentage of the population that is not?

The Bureau of Labor Statistics measures a metric that it calls the “Labor Participation Rate”, which stood in April of 2013 at 63.3%. This statistic measures the number of people in the labor force that is either working or actively looking for a job as a percentage of the civilian population aged 16 and older.

It also measures a metric that it calls the “Employment-Population Ratio”, which stood in April of 2013 at 58.6%. This statistic measures the proportion of the civilian noninstitutional population aged 16 years and over that is employed. It includes people who are under-employed in terms of the time they get paid for or in terms of the level of work they are asked to perform.

Thus it appears that also in our country close to half of the population is left out of the labor process. Some percentage of this “unengaged” population is either below working age, retired with no intent to get re-engaged or studying full time.

The bottom-line is that the Federal Government cannot tell us with any degree of precision what percentage of the work-eligible and work-capable population is actually disengaged from the labor process and thus not participating in the growth of our economy and the strengthening of our nation. But we can come at it from another angle:

We know from the Census that the USA has a population of about 314 million, that about 74 million are below age 18 and about 42 million are over the age of 65. Since some unknown percentage of these age-groups are employed (let’s assume 10% of this populus), it follows that our labor pool would be approximately 210 million.

We know that in April of 2013 we had

·         11.7 million unemployed

·         14 million on disability (a staggering number!)

·         2.3 million in prison (a staggering number!)

·         7.6 million involuntary Part Time

·         2.3 million marginally attached

These 5 categories add up to 37.9 million people in the USA that would theoretically qualify for the workforce but are either unemployed or underemployed. That represents 18% of the labor pool. Arguably, this number is a more accurate measurement of disengagement of the labor process than the unemployment rate of 7.5%.

Warren Buffet, in his interview in Fortune, states: “No manager operates his or her plants at 80% efficiency when steps could be taken that would increase output”. We point the finger at the Islamic Arab world for running their nations at 50% efficiency by denying women the right to participate. But we should not be blind to the fact that we run America at much less than 100% of its horse-power.

If America wants to stay on top in the race of nations, it will have to find a way to run on all cylinders and get a much larger part of the labor pool, men and women, engaged in supporting its economic growth and development.

*In the May 20 issue of Fortune