Who Is Dropping Out of the Labor Force?

January 17, 2014

The labor force participation rate has dropped 7 percentage points for workers ages 16 to 24, says Diana Furchtgott-Roth, director of Economics21 at the Manhattan Institute.

  • Young workers (ages 16 to 24) have seen the largest decline in labor force participation, dropping from 62 percent to 55 percent between 2003 and 2013.
  • For workers between age 25 and 54, the participation rate has only declined by 2 percentage points (from 83 to 81 percent).
  • For Americans age 55 and older, participation has increased by 4.6 percentage points over the last decade, for both men and women.

The fall in young workers' labor force participation rates has not corresponded with a similar increase in school enrollment. In fact, the percent of 16 to 24 year olds enrolled in high school, college and university increased by only 0.3 percentage points over the last 10 years.

Part of the reason that fewer jobs exist for younger workers is due to the increase in labor force participation for older workers: older Americans are retiring later, which means that there are fewer job openings for the youth.

On top of this, gross domestic product growth has been very slow. Slow growth means little job creation, which in turn discourages participants and leads younger and middle-aged workers to drop out of the labor force.

Without major tax, regulatory and entitlement reform, the poor labor force participation rate is unlikely to improve.

Source: Diana Furchtgott-Roth, "Who Is Dropping Out of the Labor Force, and Why?" Real Clear Markets, January 14, 2014.

 

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