Labor Participation Rate and the Social Safety Net
Although unemployment has dropped during the Trump administration, the labor participation rate has stayed steady. The labor participation rate is the labor force (people employed and seeking employment)divided by the adult population.
Why does it matter? Well, all of those folks who are out of the labor force and aren’t looking for work total about 59 million Americans (160 million Americans in the labor force in 2018 and a 63% labor participation rate today). As the population continues to grow, the raw number of people out of the workforce will also grow unless the labor participation rate goes up.
Granted, many of the people in the 59 million are retired. Even so, the demands for healthcare, rent/mortgage, and living expenses for 59 million people who aren’t working is tremendous. Its important that social policy and spending take the employment participation rate into account. Many of the 59 million “no work” Americans rely on social programs. Each new person entering one of the programs raises costs.
The number of men without work is at an all time high. The number of men out of the workforce is at an historic high. Men’s wages are growing slower than women’s wages. Men don’t do well when they aren’t engaged in something productive.
How can we get more people into the workforce, or how can we entice people to want to work longer and delay retirement? In a word, wages. Economic growth without wage growth is a recipe for low labor participation rate. Although the Trump economy has pushed the unemployment numbers to all-time lows, wage growth hasn’t followed. Since wages haven’t gone up for most Americans, income and wealth inequality is running off the rails.
Wages need to go up in order to save the social programs Americans love. The longer folks work and stay working, the better the existing social programs function.
