Americans Continue To Opt Out Of The Workforce

As unemployment remained at low levels in June, the portion of American adults participating in the job market remains far below pre-recession levels, according to a Friday news release from the U.S. Bureau of Labor Statistics.

Unemployment remained at 3.6% for the fourth month in a row — approximately the same as February 2020, the month before COVID began spreading rapidly through the United States, according to the agency. The unemployment rate has therefore improved significantly from the 14.7% level seen in April 2020.

Yet the labor force participation rate — the percentage of people who either have a job or are actively looking for one — has not recovered since the recession. The metric dropped from 66% in 2008 to 63% in 2020, then fell another 3% between February 2020 and April 2020 alone as COVID led to government lockdowns and business closures. Men, in particular, have seen a gradual disengagement from the labor force since the end of World War II.

As of June 2022, labor force participation is 62.2% — a slight decline from the 63.3% level seen in May 2022, according to the Bureau of Labor Statistics.

“There are 755,000 fewer Americans employed today than prior to the pandemic, even as the population age 16 and over has increased by 4.2 million,” Heritage Foundation research fellow and former U.S. Joint Economic Committee senior economist Rachel Greszler said in a statement provided to The Daily Wire. “This has caused massive struggles for employers and is directly contributing to inflation, as employers have to pay workers more to do the exact same work they were doing before. Yet, even as average earnings are up $3,100 over the past year, the average worker is $1,800 poorer after factoring in a $5,100 inflation tax.”

In 2020, median household income in the United States was roughly $67,500, according to the U.S. Census Bureau — meaning that a $1,800 effective pay cut constitutes a 2.7% decline in the typical household’s earnings. Inflationary pressures have forced some Americans into unretirement, according to job platform Indeed, which recently noted that roughly 3.2% of workers who were retired a year earlier are now employed once again.

Federal COVID stimulus, however, appeared to hamper labor market recovery, thereby worsening inflationary pressures. In March 2021, President Joe Biden enacted the American Rescue Plan — a $1.9 trillion package that extended the $300 weekly bonus unemployment benefits first passed under President Donald Trump through September 2021. Within a few months, half of American governors prematurely opted out of the extension.

A paper published by the National Bureau of Economic Research confirmed that states which left the program saw “the flow of unemployed workers into employment” increase by two-thirds.

“When it comes to maximizing employment,” Greszler continued, “the unintended consequences of many COVID-19 policies and federal interventions in the workforce demonstrate that while the temptation for policymakers is always to do more, the best way to increase employment is to abandon attempts to expand the government’s influence over people’s lives.”

Republicans on the Joint Economic Committee noted last year that only 12% of “inactive, prime-age, able-bodied men” desire a job or are open to work. Government welfare programs often disincentivize labor force participation for the demographic.

“Easing the labor shortage and alleviating inflation requires creating an environment in which more Americans want to pursue work and are able to maximize their productive capabilities,” Greszler added.

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