Labor Participation At A 30-Year Low

94,103,000 million people in the U.S. were not participating in the labor force in December according to the Bureau of Labor Statistics.

The U.S. is currently experiencing the lowest labor participation rate in 38 years; 62.4%.

While the unemployment rate stands at 5%, many question why so many people are not working?

Bloomberg sought to better understand the BLS numbers by digging into this question.

What they found was surprising; among all age groups, retirement was cited as the reason for being sidelined from the workforce. This was even among those 20-24 years old.

The people falling into the 25-54 year old age cohort are considered “prime working age” so their low rates of participation are concerning. They are the main contributors to social insurance programs like Social Security and Medicare and if they are not working it means they are not contributing to these programs.

Younger workers also need to accrue skills they can only learn through real work experience and so they are being shortchanged when jobs are not available. This will inevitably also impact their ability to command higher wages in the future.

For workers who are also parents, the crippling cost of outside childcare has forced many two-earner families to reconsider the feasibility of that arrangement. In the face of declining or stagnant wages, it no longer makes sense for both parents to work if they also have young children to care for. Women are primarily the ones who drop-out of the labor force for this reason.

The disproportionate impact on women forced to choose between work and taking care of children is well-documented.   The Financial Times has reported that the U.S. is the only major advanced country where labor force participation rates fall among women of core working age. This is also troubling.

Young people and women seem to be the losers in this new economy; young workers have trouble finding suitable employment and women are being pulled between the responsibilities of work and home, making dropping out more and more attractive.