Heritage Expert: Unbalanced Labor Market Continues to Weigh On The Economy

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Heritage Expert: Unbalanced Labor Market Continues to Weigh On The Economy

Jun 3, 2022 2 min read

WASHINGTON—According to new numbers released Friday, the labor force participation rate in May remained unchanged at 62.3%, representing a decline of 2.9 million workers compared to pre-pandemic rates.

Despite broad availability of job opportunities, millions of Americans are choosing to remain outside the workforce. This unbalanced labor market is weighing on the economy.

Rachel Greszler, Heritage Foundation research fellow in economics, budget, and entitlements, released the following statement Friday:

“The Biden administration’s policies fueling inflation through massive government spending and depressing workforce participation have been most harmful for young workers. Employment among individuals ages 20-24 has declined by 536,000 since the start of the pandemic, making up more than the entirety of the 440,000 total decline in employment. Instead of launching out into the workplace, hundreds of thousands of young workers are staying on the sidelines. 

 

"Blanket forgiveness of $360 billion worth of student loan debt is just the latest example of the administration’s backwards attempts to address government-created problems. This morally hazardous, regressive, and inflationary plan to cancel the debts of America’s most affluent by making working Americans without college degrees pay for those debts instead will further drive up inflation, crowd out less expensive and more effective education alternatives, and encourage students to take on even more debt in hopes of future ‘forgiveness.’     

 

“If policymakers want to simultaneously ease labor shortages, reduce higher education costs, and improve workers’ skills and readiness for in-demand jobs, they should phase out higher education subsidies that are disadvantaging alternative education, replace failed federal job training programs with employer-driven education, and direct the Department of Labor to revive the flourishing Industry Recognized Apprenticeship Programs that the Biden administration cancelled."

BACKGROUND: Worker shortages are particularly troubling heading into the summer when seasonal employment usually fuels summer travel, entertainment, and activities like camps and community swimming pools.  

Employers continue to struggle to find the workers they need. The National Federation of Independent Businesses reported that 51% of employers had job openings they were unable to fill in May, matching a recent 48-year record high. With 11.4 million job openings in April, there were 1.9 jobs available for every unemployed worker.  

As employers raise wages to attract workers, those wage gains are translating into even higher price increases. Despite the median wage increasing by $3,300 over the past year, the average worker is $1,800 poorer after inflation has acted as a roughly $5,000 tax. 

 

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