Losing participation points
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Today, the White House tried to answer one of the thorniest questions about the U.S.’s post-recession economy: why, despite the recovery, has the percentage of working-age Americans that are either working or looking for work steadily fallen? At the beginning of the recession in December 2007, what economists call the labor force participation rate was 66%. It is currently 62.8%, the lowest it’s been since the 1970’s.
About half the answer, the Council of Economic Advisors says, is that America’s workforce is getting older and “older individuals participate in the labor force at lower rates than younger workers.” Another third of the drop is due to pre-recession trends like declining participation by so-called prime age workers, plus the particularly nasty but inchoate effects of the Great Recession, like a big rise in the ranks of the long-term unemployed (economists think this pushes down the participation rate but are not completely sure why). Another sixth of the decline is due cyclical factors (the normal ups and downs of the economy).
Business Insider’s Myles Udland points out that the White House is chiming in on a highly politicized debate regarding just how strong the labor market is. The Obama administration is saying, the WSJ’s Josh Zumburn writes, that “only one-sixth of the decline is clearly attributable to the weak economy.”
Matt Yglesias thinks the most important issue for ordinary people isn’t about demographics or business cycles, but about what the paper calls the “residual”: the fall in the participation rate that we can’t quite figure out. Unfortunately, he says the study doesn’t come up with any firm answers about what’s causing this chunk of the decline. As Felix Salmon pointed out in 2012, the last time the participation rate was this low, trends like women joining the workforce en masse were still unfolding. Other factors are at work now, and are part of the reason why the US is in the midst of its weakest post-war recovery. — Ben Walsh
On to today’s links: