4 Reasons U.S. Labor Force Participation is at an All-Time Low



In 2007, two-thirds of Americans had a job or were actively seeking work. Fast-forward to today, just seven years later, and that number has dropped to 62.8 percent. To put it in perspective, that’s the lowest level since 1977. The numbers tell us what’s happening, but the greater question is why.


Read on to discover some of the reasons America’s labor force participation is at an all-time low.


America Has an Aging Population


55727218 cb8009844a z - 4 Reasons U.S. Labor Force Participation is at an All-Time Low


Image via Flickr by National Guard Officers Association & Enlisted National Guard Association of Florida


Between 1960 and 2000, America’s labor force jumped from 59 percent to 67.3 percent. The working landscape shifted as more women decided to abandon the traditional housewife role and advance their careers. Improvements in healthcare also allowed American employees to work longer, and a greater number of desk jobs reduced the risk of injuries.


However, since 2000, the labor force has been steadily declining as baby boomers reach retirement age. Americans over the age of 65 are far more interested in getting Fisher’s annuity assistance than working nine to five. In 2012, the Federal Reserve Bank of Chicago suggested retirements accounts for a quarter of the drop in labor force participation since the start of the recession. Barclays and other analysts suggest this number is conservative, believing retirements could account for more than half of the decreased labor force.


Mature Adults are Heading Back to School


However, America’s aging population can’t explain why participation rates for workers aged between 25 and 54 haven’t recovered since they fell during the global financial crisis. Many people believe this is because adults are going back to school instead of the workforce.


The National Center for Education Statistics says almost four million American adults 35 years and older are currently enrolled in degree-granting education. More than two-thirds of these are women determined to gain the skills they need to excel in a competitive job market. They know a woman still earns 77 cents for every dollar a man earns, so they’re determined to land a job that can get them ahead of the curve and help them keep it.


Not that men without college credentials have it any easier. Regardless of gender, the unemployment rate for workers holding only a high school diploma is 8.1 percent. Gaining a bachelor’s degree slashes that number to just 3.7 percent. When you consider the raw statistics, it’s little wonder adults are heading back to school.


Young Adults are Delaying Entering the Workforce


For similar reasons, the percentage of 16 to 24 year olds pursuing an education rather than entering the workforce is steadily growing. Twenty-five percent more American teens attend college now than they did in 2000. They’re also taking longer to finish as they pursue advanced degrees that can help them get ahead in the competitive job market.


“We used to say that a high school degree wasn’t sufficient to provide a middle class income,” Bill Rodgers, a professor and chief economist at Rutgers University’s Heldrich Center for Workforce Development, told The New York Times. “Now we’re saying no longer is a bachelor’s degree.”


More Workers are Claiming Disability Insurance


Almost nine million Americans currently receive disability benefits, which is roughly twice as many that received the payments a decade ago. This is likely to be a smaller part of America’s shrinking labor force, but the dramatic rise in numbers is worth considering.


America’s aging population certainly contributes to these numbers. As workers get older, they’re more likely to injure themselves on the job and make themselves eligible for these payments.


There’s also another theory that some workers use the disability insurance as a kind of safety net once their unemployment insurance runs out. Some economists suggest this might not be a calculated move on the part of the recipient, but one that results simply because of circumstances.


Consider a construction worker who injures his back on the job, for example. If the economy is good, he could probably resume working in a desk role for his former employer. However, in a tougher economic climate, it’s less likely that such a position will be available. In turn, this makes it easier for the construction worker to meet national eligibility standards and collect disability insurance rather than returning to the workforce.


All these factors have contributed to the United States labor force participation slumping to levels we’ve never seen before.

Share small business news, blogs and social media tips with Project Eve’s community of small business owners and entrepreneurs today. Our contributors come from a wide range of backgrounds; so whether you are a small business owner, social media strategist, financial adviser, serial entrepreneur, or write an amateur blog we urge you to contribute a blog to our 500,000+ community today. For more information, please refer to our Content Submissions Guidelines.

Add a Blog