The most recent BLS jobs report showed that almost 500,000 Americans left the workforce in March, resulting in the workforce participation rate falling to 63.3%. This is the lowest its been since 1979.
There's a pretty active debate over what's driving this decrease. We covered this last year in our article Workforce Participation: Where's Everyone Going?
We now have more data than last year and the answer is people are leaving the workforce for a variety of reasons, including:
- Younger Americans are staying in school longer
- The number of people on disability is up substantially over the last past decade
- Aging baby boomers are starting to retire
- The number of people on food stamps and other government support programs is up
Even more troubling than the overall decline in the workforce participation rate is the decline among people aged 25-54. These are the prime work years when people generally aren't in school, retired or disabled.
As the chart below - from the always informative New York Times Econmix blog - shows, for this age cohort the reduction in the unemployment rate is almost fully explained by the decline in workforce participation.
This is a huge problem for America. Not only does lower workforce participation mean lower economic growth, it also raises government spending on support programs and leads to greater participation in the informal (meaning illegal) economy. It's also bad for the people who aren't working.
Unfortunately, there are no easy answers to this problem.