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Reflections on the Fall in the Labor-Force-Participation Rate

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In my latest column for the Pittsburgh Tribune-Review I reflect on some possible causes of the fall, in the United States, in the labor-force-participation rate [2]. A slice (link added):

Indeed, the very length and timing of the 70-year-long decline in men’s labor-force participation [3] strongly suggests that much of this decline reflects a rise in prosperity rather than in problems.

In the decades immediately after WWII ordinary Americans famously became wealthier. The U.S. economy boomed, despite the fact that Americans back then did relatively little trading with non-Americans. Yet men’s labor-force participation rates nevertheless fell steadily as the economy motored merrily along. In January 1950 men participated in the labor force at a rate of 86.2; 10 years later this figure was 83.6. And 10 years after that – in January 1970 – this rate had fallen further, to 79.9.

The most plausible explanation for this post-war decline in men’s labor-force participation is that Americans’ greater wealth both allowed more American males to attend college (and, increasingly, even graduate school) rather than start full-time work at 18, as well as allowed more American males to retire early.

In addition, America’s increasing wealth renders government more willing and able to enact programs that allow working-age adults to remain out of the labor force temporarily or (as with some disability payments through Social [4]Security [4]) permanently. Whatever you think of such programs, their reflection of America’s increasing wealth should not be missed.

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