1. The problem of US Labor force participation
By: Chad P. Bown and Caroline Freund

2. About the authors Bown Freund
Ph.D in Economics from University of Madison-Wisconsin
Reginald Jones Senior Fellow at Peterson Institute for International Economics
Freund
Ph.D in Economics from Columbia
Director of Macroeconomics, Trade, and Investment at The World Bank

3. Introduction
Labor Force Participation – Labor Force (Employed & Unemployed) / # of Individuals of Working Age (15-64 in US)
Sharp Decline in labor force participation, but better unemployment rates
Cause Varies by Gender
Male
Structural, matches what is happening in other countries
Structural plus disability insurance explain 1/3 of male participation decline
Female
Disability explains 2/3 of female participation decline
Disability Insurance becoming an important form of assistance for long-term unemployed people

4. United States and Europe
Other countries have the same pressure of technology and trade
OECD experienced a 4% increase, US down 1.8% from 1995 to 2017
Men see a slight decrease in participation everywhere
Women see an increase except in US, where it has been flat or decreasing
Americans more likely to leave labor force if they can’t find a job
Other countries, people stay unemployed but stay in labor force
US is close to others in share of prime-aged people that are employed
This means people are not looking for jobs and therefore leave the labor force, lowering participation
Unemployment numbers are deceiving

5. Canada and the United States
Canada – Employment rate increasing, also unemployment rate increasing
People pushing to join labor force
Incentives in Canada to stay in labor force don’t exist in US
Average length of unemployment is over 6 months in US
Canada is right around 4 months
Longer unemployment means more discouraged workers
Hard to convince people to reenter the work force once they have left

6. Labor Market and Disability Insurance
Disability Insurance more readily available than labor market adjustment assistance
US has high expenditures but less support for unemployed workers
Programs such as unemployment insurance, placement services, and skills training
US has 40% increase in spending related to disability since 2000
Declines in most other countries over this period
Decline in workplace injuries in private industries (3% in 2016, from 5% in 2002)
1984 laws made qualifying for disability easier
Opioid Crisis – 1/3 of prime-aged non-participants take prescription pain meds

7. Regional Mobility
More difficult to move away from distressed parts of the country
More likely to move during strong economies
Migration rates rise with education and fall with age
Older, less skilled workers unlikely to move
Likely not a policy priority

8. Conclusion Workers, especially men, are leaving the labor force:
Causes:
Disability Insurance
Financial Crisis of 2008
Long Unemployment
Changing Structure of Market
Opioid Crisis
Incentive programs to stay in the labor force should help with the labor force participation rate

9. Opinion
Free market has made disability more desirable, hurting work force
People’s inability (or unwillingness) to adapt to different types of work and changing work climates lowers the participation rate
Government programs can be an effective form of resolution
However, this could cause a spike in unemployment rate
Ultimately, benefits of keeping people in labor force outweigh costs

10. Questions?