According to Josh Zumbrun in the Wall Street Journal, the improving economy is simply not enough to get people back into the labor force. Zumbrun features three “nagging indicator” charts showing that a dramatic share of the unemployed are simply leaving the workforce (particularly since 2008), the rate of unemployed reentering the workforce is the lowest since 1990, and the labor force participation rate is the lowest in 35 years.
As Zumbrun rightfully points out, a retiring mass of baby boomers is not the sole reason for the declining labor force participation rate. Back in the day, people had to work. Now, not so much. There are benefits that provide alternatives to work everywhere you look:
- 11 million people (former workers and their dependents) are receiving disability benefits. Since 2001 the growth rate for women receiving benefits is 5.64 percent a year; for men, 4.06 percent a year. (See NCPA report.)
- For those receiving disability, there are a variety of other benefits they become eligible for, including Medicare, Medicaid, housing and energy assistance.
- For those who are not disabled but qualify for unemployment, most can receive unemployment benefits up to a maximum of 26 weeks in most states. According to Business Insider, prior to the expiration of the Emergency Unemployment Compensation program at the end of 2013, some states paid benefits for up to 73 weeks!
- About 20 million households are receiving Food Stamps, in part due to the recession but also due to “broad-based categorical eligibility.”
We often hear about the “welfare culture” that creates generations of dependency, but there seems to be a new breed of adults, who have been raised in middle-class or wealthier homes, whose families have never received welfare benefits, but who are in no rush to become employed. A Pew research study seems to hit the nail on the head. Among millennials ages 18 to 31:
- 36 percent of them still live with their parents.
- 50 percent of them are not in the labor force, while another 45 percent are unemployed.
- 39 percent of 18 to 24 year olds are enrolled in college.
- Only 25 percent of millennials are married. Only 3 percent of them live with parents compared to 47 percent of singles.
- Young men are more likely to live at home than young women.
For all the talk from economists about disincentives, there appears to be several among young adults that make work less attractive: the college experience versus a nine-to-five job, no commitments to a spouse or children, and parents and family members who are willing to contribute financially.
Public policies contribute to making work less attractive by relieving individuals of the need to work. This is not a problem that can be fixed by job stimulus or interest rate tinkering.
