America’s low labor force participation rate since the COVID pandemic has become a problem for the US economy, experts say.
Economists say an unprecedented decline in labor force participation has been widely felt in the United States following the onset of the pandemic in 2020.
Health concerns, adverse reactions to the COVID vaccines, lockdowns and stimulus payments have forced tens of millions of Americans still in their prime from work.
Three years later, many of those who stopped working have still not returned to work, alarming experts.
A jobs report by the Labor Department showed that the US unemployment rate fell to 3.4 percent in January, the lowest level in more than 50 years.
“We have an aging population, a drop in labor force participation, an increase in gig economy jobs and… the pandemic has caused many to retire altogether, which has artificially lowered the unemployment rate,” Riley Giauque, an investment adviser, said in a tweet .
Economists worry about low labor force participation
Although some economists see the low unemployment rate as a good sign, others are not celebrating the latest figures, fearing an approaching social and economic crisis.
“THIS is the employment number that should be worrying Americans: our miserable labor force participation rate. Some Americans have stopped looking OR have decided they don’t want to work OR have cobbled together enough forms of welfare instead of working. A social and economic catastrophe. . . Samuel Gregg, a Distinguished Fellow at the American Institute for Economic Research, posted on Twitter on Feb. 9.
Rachel Greszler, senior research fellow at The Heritage Foundation and former senior economist at the Joint Economic Committee of Congress for seven years, spoke to Fox Business about the problem.
Greszler said certain groups, such as parents and low-income workers, were disproportionately affected when the pandemic started, but it has now spread to other demographics.
She cited recent data from the US Bureau of Labor Statistics (BLS) that the virus is not the only reason many older workers are leaving the workforce.
American workers with children at home are now returning to work at the same pace before the March 2020 pandemic, but employment for workers without children fell 2.7 percent.
7 million young Americans have retired
Greszler also told Fox Business that people in the 20- to 24-year-old age group experienced the largest employment decline and that there had been a surge in young adults living in their parents’ homes.
Meanwhile, the able-bodied males in this age group, about 7 million of them, have completely left the labor force.
Last October, Fox Business host Mike Rowe called this latest development “startling”.
“I think in terms of that participation rate, that’s the scariest metric of all for me. It’s scarier than the latest testimony because it’s an indication of what’s to come,” Rowe said.
“Seven million able-bodied men between the ages of 25 and 54 not only don’t work. You’re definitely not looking for a job. You punched out. You are done. The vast majority of them spend over 2,000 hours a year in front of screens.”
“Today you have 11 million vacancies. They’ve got 7 million able-bodied men sitting it out. So what’s really happening in the country now, what terrifies me deeply, is that we’ve never had so many untapped opportunities and so little enthusiasm for them,” he said.
But Greszler noted that the labor force participation rate has been declining over the past two decades, well before the pandemic, according to over 70 years of data from the BLS.
Labor force participation peaked around 2000.
She said employment for men aged 20 to 24 had fallen 10.5 percent since the turn of the century.
She told Fox Business that expanded government benefits over the past 20 years have encouraged young and fit workers to stay at home.
“I think about the future of my children. I’m an economist, so I want them to have all the information and make an informed decision,” Greszler said.
“But if you make a wise financial decision, the difference between not working or working 10 hours a week in a young age job and just collecting a lot of benefits compared to a typical working-class or middle-class job isn’t much at all she said, asking “why bother?”
Older workers are returning to work due to inflation
On the other hand, workers aged 55-64 have returned to work just as quickly as they did before the pandemic.
This is a reversal of the trend of older workers choosing to retire early after the pandemic.
Greszler referred to a January report from the Sauder School of Business at the University of British Columbia entitled “The Great Resignation Was Caused by the COVID-19 Housing Boom”.
The study says that rising home prices were the main reason for the decline in labor force participation among workers aged 65 and over.
“The worrying part is, what does this mean for the future of the workforce?” she asked.
“If you’re talking about people who have somehow been driven off the educational or work experience paths they would otherwise have taken and instead just been idle at home – living with mom and dad or maybe in a group and just being able to get around from living on benefits — they’re not getting the experience and education they need,” Greszler told Fox Business.
“So I think it’s really worrying going forward that we could see this having longer-term implications,” she warned.
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