Labor Force and Diamonds

Dear Mr. Berko: Recently, I’ve been hearing the term “labor force participation rate” on most of the news shows. Could you please explain what this term means in simple-to-understand English? And what do you think of investing in diamonds? A jeweler friend says the price of diamonds has fallen by 40 percent. He wants four of us (all five of us are friends) to invest $250,000 in gem-quality diamonds. He and each of us would put up $50,000. What do you think? — EP, Bethlehem, Pa.
Dear EP: I think it’s a good way for five people to destroy a friendship.
The only thing that makes a 5-carat flawless diamond a wonder to look at is the realization of how much some silly ass is willing to pay for it. Prices have fallen because of a glut in diamond production and a slump in Chinese consumer demand. Top-quality cut diamonds are down from $12,500 a carat in 2012 to $7,300 today, according to a diamond consortium.
But making matters worse are companies such as California’s Diamond Foundry. Diamond Foundry’s laboratories have recently been producing rough diamonds that are so realistic it’s nearly impossible, even for experienced gemologists, to tell the difference from the real McCoy. Diamond Foundry and others have been perfecting gem-quality stones for jewelry by using chemical vapor deposition, a technology commonly used in the manufacturing of semiconductors. Atomized gases, from a plasma reactor that’s as hot as the sun, produce carbon atoms. These carbon atoms attach to the crystal lattice of a natural diamond substrate, enabling a new diamond to grow. They can be cut as exquisitely as a genuine diamond and cost about 30 percent less than a natural stone. Meanwhile, Leonardo DiCaprio, star of the film “Blood Diamond,” is backing these stones as “morally pure.” This plays on the social consciousness of millennials, who represent a large portion of this market.
The labor force participation rate is defined as the percentage of working-age people in our economy who are employed or unemployed and looking for a job. One is considered a working-age person if he or she is between the ages of 16 and 64, excluding students, non-civilians, disabled people, homemakers and retirees younger than 65. The normal LFPR is about 67.5 percent; however, this percentage has declined significantly during the past seven years — it’s 62.7 percent today — and that’s concerning. The U.K., by the way, has a 74.3 percent LFPR.
Today’s LFPR suggests that millions of working-age people have stopped looking for work. It tells us (100 minus 62.7) 37.3 percent of America’s labor force is unemployed. This is a 38-year low and is 4 percent lower than the 66.7 percent of January 2009, when Barack Obama was sworn in as president. Note that each 1 percent drop in the LFPR means that roughly 2.5 million WAPs have stopped looking for work. The reason for the declining LFPR is that the “opportunity costs” of not working (given numerous state and federal government assistance programs) have declined dramatically since 2009. During the recovery period between 2009 and today, record numbers of WAPs have applied for disability, and their number has exceeded the number of newly created jobs. Unscrupulous lawyers (earning generous fees) have assisted many unemployed Dons, Ricks and Marys in applying for Social Security disability benefits, while others, working with the Department of Veterans Affairs, have cleverly! coached veterans on how to abuse the VA disability system, also earning generous fees.
Because it’s not politic, few of us will acknowledge that when the costs of not working are de minimis, it makes no economic sense for an unemployed person to seek employment. Such a person probably won’t seek employment, and that is an economic fact of life and is as normal as the sunshine and rain. If Bill or Keshawn can sculpt 400 bucks a week from the system without working, why should he take a job laboring eight hours a day to earn $475 a week? And WAPs who are working are paying the cost for state and federal benefits that become disincentives for others to seek work.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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