The decline in labor-force participation

Date posted: December 10, 2013

One of today’s top economic issues is the significant decline in the percentage of working-age people who either are working or looking for work. N.C. State University’s Dr. Mike Walden outlines how one prominent economist explains this trend.

“This is the big, big issue right now, not only among economists but in public policy decisions. That may be the biggest issue right now — the labor market. And we have a fresh, new paper from a top labor economist in the country who devoted his efforts to looking … in a detailed way at this issue.

“And he came to some, I think, very interesting findings. First of all, he indicated and agreed with many others who say that part of this is due to the aging of our population — that particularly (those who went to work) in the mid- to late ’50s, many of those folks have decided to go ahead and retire, so that’s reduced labor-force participation.

“He also looked at the issue of whether the social safety net — whether some of our programs that help people out of work — may be encouraging them to stay out of work. He found little evidence for that.

“But what he did find is that the decline in the labor-force participation seems to be greatest for young males who do not have high levels of education, particularly who are high-school dropouts, and therefore they are simply not finding job opportunities now.

“Now, among women, he found the same, but the added characteristic for women is that they tended to be unmarried with no children.

“So I think this makes sense. If you look at the labor market, where jobs have disappeared most, it’s really for young unskilled workers.

“And so this finding matches with that to say that because those jobs are disappearing, those folks who would’ve taken those job simply are not finding jobs and eventually give up looking for work. So they drop out of the labor force.

“So his argument is that a big part of the problem, and the decline in labor-force participation, is the lack of jobs for particular individuals.”

 

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