The American Work Force Falls Behind Europe’s, in Two Charts

by Patrick Brennan

It’s no secret that the U.S labor-force-participation rate has dropped dramatically in recent years, in part because Baby Boomers are retiring. But the percentage of working-age Americans who have jobs or are looking for them (i.e., are in the labor force) is also dropping dramatically in absolute terms — and relative to other wealthy nations. Gary Burtless, an economist at Brookings, highlights the following two charts showing that phenomenon. The rate for men aged 25–54:

And women aged 25–54, where the U.S. had once been quite strong:

The U.S.’s labor-force-participation rate overall remains higher than most of these nations’, because Americans start working sooner in life and stop working later due to smaller social safety nets and more efficient labor markets.

At those two ends of the spectrum, however, the U.S. has been dropping in absolute terms, too — labor-force-participation among Americans 16–24 is at historically low levels (though some of that is because they’re in school rather than working, which, if they find employment later, will not be a bad thing). A British economist remarks to the FT today that ”America is even more flexible than us and yet there is this complete contrast” in which the U.S.’s labor force is shrinking faster than the U.K.’s. To some extent, higher labor-force participation in other countries makes sense because their workweeks are shorter, but this doesn’t help explain our declining relative status.

With American labor-force-participation level dropping so dramatically, a lot of economists have been asking and debating how much of it can be attributed to demographics and how much to economic weakness: America is getting older, and the rate at which women work isn’t skyrocketing anymore. But prime-age labor-force participation removes the former of those concerns, and we’re still seeing a noticeable drop. The consensus estimates are that something like one-half to two-thirds of the labor-force drop are due to demographics (which still, of course, presents an economic and fiscal problem, even if it it’s inevitable).

Another, more depressing conclusion: The drop in labor-force-participation among prime-age men isn’t so much about continued economic weakness as it is about permanent shifts that have depressed wages (making work less appealing than non-work) and suppressed jobs growth.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.