The Surprising Truth About America's Shrinking Labor Force

Moneybox
A blog about business and economics.
Aug. 2 2013 9:53 AM

America Is Leaning Out—Fewer and Fewer Women are Entering the Labor Force  

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A woman speaks to a potential employer at a New York state jobs fair in the Harlem Armory in New York City. Statistics show that women are entering the workforce at a reduced rate.

Photo by Andrew Burton/Getty Images

Our image of the falling labor force participation rate in America focuses on what the Bureau of Labor Statistics calls "discouraged workers." That's people who lost their jobs and became unemployed, and then stayed unemployed long enough that they gave up on trying to find a job. But an important new report from Austin Nichols and Stephan Lindner of the Urban Institute say this is all wrong (PDF), and the drop in the labor force is all about fewer people entering the workforce, not people leaving it.

They show this in two tables. The first compares exit rates from the labor force, broken down by age and by gender:

labor force exits_1
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The second shows entry rates into the labor force, broken down by age and by gender:

labor force entry_1

What you can see is that although plenty of people are dropping out of the labor force, plenty of people are always dropping out of the labor force. There's no class of people who are dropping out at a higher rate than they were previously. By contrast, we see that older men have slightly decreased the rate at which they enter the labor force. But more strikingly women of all ages are becoming less and less inclined to enter the labor force. They're leaning out.

Now one hopes that many of these younger women who aren't entering the workforce are in school instead and hopefully learning something worthwhile there. If young people not joining the labor force was uniformly a bad thing for the economy, then widespread use of child labor would be the path to prosperity. But that probably doesn't explain 100 percent of what's going on with the under-30 cohort, and it's almost certainly not a major factor in the 30-54 cohort. More likely moms who'd left the labor force when their kids were born are being tempted back into the labor force at a reduced rate. After all, if the job opportunities available are neither lucrative nor fulfilling then the alternative of unpaid work in the domestic sector looks more appealing.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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