Why aren’t more American women and men in the labor force?

An important question now facing the United States is: Why aren’t more American women and men participating in the labor force? 

U.S. economists say that America’s low labor force participation rate is holding the country back. They believe raising the proportion of Americans in the labor force should be a national priority. 

If more Americans joined the job market, economists contend, the economy and wages would grow faster and there would be a reduction in the huge economic cost of having millions of potential workers outside the labor market. Accordingly, many are trying to figure out why so many American women and men remain outside the labor force, especially with a rapidly improving economy.

Some perspective on U.S. labor force participation may be gained by country comparisons. While Americans are more likely to work than Brazilians, Italians, Mexicans and Poles, they are less likely to work than the British, Canadians, Germans, Japanese and Swedes.

Prior to the pandemic, the labor force participation rate of Americans aged 25 to 64 years in 2019 was just below the average for OECD countries. Some 30 countries had a higher rate than America’s level of 78 percent, including Canada with 82 percent, Germany with 84 percent, Japan with 86 percent and Sweden with 89 percent. If the U.S. had Japan’s rate, America’s labor force would increase by 14 million, or twice the number of the country’s unauthorized migrant workers.

The question of why more American women and men aren’t in the labor force takes on increased significance as Congress debates the administration’s relief programs and plans for economic recovery, rescue and expansion. 

In April the U.S. labor force participation rates of women and men in the prime working ages of 25 to 54 years were 75 and 88 percent, respectively. Although those rates are higher than the low rates in April 2020, which were 54 and 66 percent, respectively, they remain below the rates of the recent past and way below the rates of Canada, France, Germany, Japan and the United Kingdom. 

Also, recent figures for May indicate that the labor participation rate remains largely unchanged. Approximately 62 percent of working-age adults were in the labor force, which is about 2 percentage points below the February 2020 level. 

With the economy picking up, many businesses report that they can’t get enough workers. This shortage of workers, they claim, is having undesirable consequences, including stifling growth, driving up wages and inflation. Others maintain that there is no labor shortage as many are returning to the improving job market, especially when businesses raise low wages.

Some in Congress, state capitals, the business community and elsewhere argue that the availability of enhanced unemployment benefits, particularly the extra $300 a week in jobless benefits, and government financial assistance are functioning as disincentives keeping many Americans from taking jobs. Those receiving enhanced benefits, they contend, are not eager to return to work for potentially less income.

Accordingly, 25 state governors — all Republican — have recently decided to reject more than $26 billion in federal enhanced unemployment benefits. They believe that cutting off those enhanced unemployed benefits will drive people back to the workplace. 

The U.S. Chamber of Commerce supports plans to end federal enhanced unemployment benefits. It is also urging states to use American Rescue Plan funding to help working parents struggling with the costs of child care and calling for more immigrant workers to be admitted.

Many economists have pushed back against blaming enhanced unemployment benefits, which expire in September, and offer other explanations for America’s low rates of labor participation. One explanation focuses on personal health conditions and illness concerns, in particular fears relating to the risk of contracting COVID-19 when returning to the workplace.

Another explanation emphasizes the need to stay home to care for kids or an older person due to closed schools and inadequate child care. Census surveys in late March reported that more than 6 million Americans, mostly women, were not in the labor force because they had to take care of their children at home and more than 2 million were at home caring for an older person.

An additional explanation centers on low hours, low-wage and low-quality jobs. Americans eschew such employment, especially in the leisure and hospitality sector, because those jobs offer too little money relative to basic living costs, difficult working conditions and involve a low quality of life.

Some have suggested that potential workers desire jobs with living wages, more manageable hours, employee benefits and upward mobility. Many outside the labor force are seeking higher wages before taking a job with some also seeking remote work. 

Another explanation for America’s low labor force participation rates has recently been communicated to Congress. The Federal Reserve chairman said that the educational system and the opioid epidemic, not enhanced unemployment checks or the welfare benefit system, are responsible for low labor force participation. 

While the opioid crisis plays an important role, the key reason for the comparatively low rates, according to the Federal Reserve’s chair, is U.S. educational attainment, which was once the highest, has fallen relative to other developed countries. This decline is especially noteworthy among lower and middle income men and women where educational attainment has plateaued.

In addition to possible explanations, various policy prescriptions are offered. Those policies include addressing opioid and drug dependency, substance abuse, poor health and diet, criminal justice reform, living wages, unemployment and welfare benefits, earned income tax credits, hiring tax incentives, job training, vocational education, disability insurance reform, child care and family leave. 

While there’s a widespread consensus on the merits of getting more American women and men into the labor force, policies to achieve that goal remain controversial and elusive. Consequently, the expected outlook for America’s labor force is that it will take years before everyone who lost their job due to the pandemic is able to return to work.  

Joseph Chamie is a consulting demographer, a former director of the United Nations Population Division and author of numerous publications on population issues, including his recent book, “Births, Deaths, Migrations and Other Important Population Matters.”