An increasing percentage of native-born men ages 25-54 (“prime age”) are neither working nor looking for work. The trend has been ongoing for decades, but recessions seem to accelerate it. As the figure below indicates, after prime-age men dropped out of the labor force in large numbers during the 2001 and 2008-2009 recessions, many never returned. Will the same thing happen after the COVID-19 downturn? The situation is worrisome:
The figure is adapted from a new report I coauthored for the Center for Immigration Studies. The blue line shows that the percentage of native-born prime-age men who are not in the labor force rose from 12 percent in April 2019 to a record 14 percent in April 2020. Prime-age men without a bachelor’s degree (the orange line) are now at 18 percent, up from 15 percent a year ago.
Perhaps this recession is unique, caused as it was by a virus and a lockdown rather than by structural problems with the economy as a whole. Perhaps “out of the labor force” is a misleading category right now for men who are unable (rather than unwilling) to look for work during the lockdown. Perhaps these men will go right back to work after the threat of the virus recedes and the states fully reopen. Time will tell, but the historical pattern is ominous. If states continue to clamp down on business activity, one consequence could be labor-force dropout that persists long after the economy has officially recovered.
The situation among male youths ages 16 to 24 is an additional cause for concern. As the green line indicates, over a quarter of young men who are not in school are also not in the labor force. They are the prime-age men of the near future, but they are losing potential experience that could be crucial for acclimating to the world of work. Caveats about the data apply again here, since school closures appear to have added about 2.5 percentage points to the normal fraction of youth who are listed as “not in school.” Nevertheless, the risk of men suffering a long-term separation from the labor market is real.
So what to do? First, let’s continue the phased reopenings. A second wave of the virus is possible, but permanent economic harm to millions of families is also possible. Once we acknowledge that there is significant downside risk to reopening and to not reopening, it becomes even more imperative to seek the least disruptive measures necessary to control the virus. A full lockdown should be a last resort.
Second, I’ve written extensively about how low-skill immigration serves as a kind of band-aid over the problem of labor-force dropout among natives. The availability of immigrants allows us to ignore the social and economic problems that cause native men to drop out of the labor force in the first place. Given the restrictions on immigration currently in place, now is a good time to start rethinking what immigration policy should look like when life goes back to normal.