Why has the labor force participation rate dropped?

However, the labor force participation rate did not recover as quickly. This low participation rate during COVID-19 has been attributed to several factors, such as the demand for care for dependent people, the increase in unemployment benefits or people who fear getting sick due to the COVID virus. The participation rate of men in the labor force has been on a declining trajectory for nearly 60 years, almost from the time the agency began keeping track of statistics. If one of the unemployed workers were to get a job, the unemployment rate would drop to 4 percent (4 unemployed workers divided by a workforce of 100 workers).

However, it remains 3.4 percentage points below its pre-Great Recession level, suggesting a continuing weakness in the labor market. This increase in growth would help create jobs and attract discouraged workers to return to the workforce, in addition to improving the long-term health of the economy. The authors record an increase in the participation rate, which went from around 60 percent in the 1950s and 1960s to a peak of 67 percent at the beginning of the 21st century, after which it has been falling steadily, to a low of around 63 percent today. At the same time, the age-adjusted rate for women has increased, but at a similar level to that of men.

By April 2000, when overall labor force participation peaked, men's participation in the labor force had fallen to 74.9 percent. The official unemployment rate would be 5 percent (5 unemployed workers divided by a workforce of 100 workers). But if, on the other hand, an unemployed worker retired and left the labor force, the unemployment rate would drop to 4.04 percent (4 unemployed workers divided by a workforce of 99 workers). As noted, in the case of women, the rate has risen compared to its pre-pandemic average and has increased significantly in recent months.

Elisabeth Jacobs, senior director of Academic Policy and Programs at the Center for Equitable Growth in Washington, testified before the United States Joint Economic Committee about “What the lower rates of labor force participation tell us about employment opportunities and incentives.” Proponents of this hypothesis argue that the easing of medical tests to detect disability and the increase in the program's income replacement rate have increased disability lists and caused healthy workers to leave the labor market. Labor force participation remained at approximately this level until 1965, when it began an increase that would last 35 years, until it peaked in April 2000, at 67.3 percent.

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