June 11, 2013
By James Sherk
That unemployment rose but the employment-to-population ratio did not rise illustrates a larger problem facing the economy: While unemployment has dropped, the proportion of Americans with jobs has scarcely increased since the recession ended. Unemployment looks better only because millions of Americans are no longer looking for work and thus do not count as unemployed.
The labor force participation rate rose 0.1 percentage point to 63.4 percent in May. Except for March and April of this year, this is the lowest rate since May 1979 -- a time when far fewer women worked in the economy.
Labor force participation among men remains at its lowest level since the government began tracking these figures 65 years ago. Just 72.7 percent of adult men are either working or looking for work.
Some analysts argue that changing demographics explain this shift. This explanation contains a measure of truth: The baby-boom generation is aging and starting to retire. An older population naturally has fewer workers.
Such demographic factors explain the modest drop in labor force participation between 2000 and 2007, when labor force participation fell by just over one percentage point.
However, between December 2007 and May 2013, labor force participation fell by 2.6 percentage points. Demographics account for only a minority of this drop. Heritage Foundation research finds that the aging of the baby-boom generation explains one-fifth of the drop in labor force participation.
The liberal Economic Policy Institute finds that demographics accounts for only one-third of the recent drop. Economists at the Federal Reserve Bank of Chicago estimate the demographic-related component at one-quarter.
Heritage research shows that most workers now outside the labor force are either enrolled in school or collecting disability benefits. The former is mixed news, and the latter poses serious economic problems for America.
- James Sherk is a Senior Policy Analyst in Labor Economics at The Heritage Foundation.
First appeared in The Washington Examiner.
Research Fellow, Labor Economics
Read More >>
Request an interview >>
Please complete the following form to request an interview with a Heritage expert.
Please note that all fields must be completed.
Heritage's daily Morning Bell e-mail keeps you updated on the ongoing policy battles in Washington and around the country.
The subscription is free and delivers you the latest conservative policy perspectives on the news each weekday--straight from Heritage experts.
The Morning Bell is your daily wake-up call offering a fresh, conservative analysis of the news.
More than 450,000 Americans rely on Heritage's Morning Bell to stay up to date on the policy battles that affect them.
Rush Limbaugh says "The Heritage Foundation's Morning Bell is just terrific!"
Rep. Peter Roskam (R-IL) says it's "a great way to start the day for any conservative who wants to get America back on track."
Sign up to start your free subscription today!
The Heritage Foundation is the nation’s most broadly supported public policy research institute, with hundreds of thousands of individual, foundation and corporate donors. Heritage, founded in February 1973, has a staff of 275 and an annual expense budget of $82.4 million.
Our mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense. Read More
© 2015, The Heritage Foundation Conservative policy research since 1973