The decline in Labor Force Participation Rate
The government of the United States is now facing a major problem of a drastic reduction in labour force participation since the year 2000. While much of the decline is due to ageing and retirement, labour force participation is also lagging among the prime age. The declining labour force is posing a serious challenge to the economy of the country; thus, a robust supply is indeed essential. The decline in the labour force is not only restricting companies from hiring but also limits the growth of the business. Due to these factors that the United States economy has been stuck for a while. This has forced the policymakers to desperately come up with ways to encounter the problem of declining labour participation. Some of the suggested options are increasing in the minimum wage, offering education and training to improve workers’ skills and encouraging companies to hire long term unemployment. This article will examine the causes of a downward trend in labour requirements and possible ways to solve the problem.
Since the turn of the century, labour force participation of those at prime age has been declining drastically in the United States. The number dropped from 67% to below 63%. Before this pragmatic change, there has been a decade- prolonged increase in labour participation fueled by the entry of women into the labour force. However, the recent decline has brought concerns from many economists and lawmakers who noticed the link between labour participation and the economic growth of the country. The downward trend started back in 2000, then became stable between 2004 and 2007, after which it accelerated. It appears that the decline is caused by slow-moving long-run factors and the business cycle condition. Ageing if the labour force is one of the long-term factors since older workers’ participation rare are lower while their shares rise. It has reached to a point where workers are willingly not looking for jobs. In March 2020, it was reported that the number of discouraged workers; those that are available for work but dropped out, has steeply increased to over 5000. There are several reasons as to why workers are discouraged, for instance, age discrimination whereby potential employers think that they are too young, discrimination of gender and race. A long time of job searching and finally, some start to believe that they don’t deserve the job.
Minimum wage can be described as the minimum amount of remuneration that an employer is allowed to pay his/her employees for their work. The idea of the minimum wage is to shelter workers against overly low pay. The government ensures that a fair and equitable share of the profits progresses by enacting these laws. Increasing minimum wages is a way to conquer poverty and reduce inequality. However, as much as the minimum wage is increased to protect workers’ interest, the result is adverse. It leads to reduced employment of prime-age and low-skilled work. Minimum wage increment may force companies to retaliate by forcing some workers, especially the young and less skilled ones. Two thousand seven statistics show that when the minimum wage was increased, it resulted in significant job losses, the same case happened in 1938. Although the evidence in the increase of job loses lawmakers still argue that raising the wage is the best way to alive the issue decline in labour force participation.
Several states have passed policies of effectively increasing the minimum wage. However, the social and economic debate on the topic continues. Economists are still arguing on the issue. Some say that it is the best way to encourage people to join the labour, thereby leading to overall economic growth. On the contrary, some argue that increasing the minimum can only worsen the solution. Most of them think that dynamic change is dangerous as this will result in a lot of economic repercussions. The business will be forced to increase the prices of their commodities and in the worst-case scenario, reducing the number of their workers to cope with the situation. As mentioned earlier, those who are majorly affected in labour force participation are the young workers; therefore, increasing the minimum wage will only worsen their situation as it will be difficult for them to find jobs. Therefore, by drawing facts from the past, is vividly clear that increasing the minimum wage does not the problem of decline in labour trends, but rather it will worsen the situation.
However, to solve the problem, the government has to come up with ways to encourage people to join the workforce. For instance, the government can increase the earned income tax credit for young adults. It will result in a profound increase in employment. Also, it should reform the disability insurance. It should come up with reforms that will restrict non-disabled people from enrolling I disability programs. Such changes will force these adults to seek employment, thereby providing the solution to the problem.
Furthermore, the government should expand access to paid family leave as the United State is the only first-world country without the policy of paid family. The paid family has a lot of labour force benefits that will encourage people to join the workforce. Besides, the government can also solve the problem by reducing opioid dependency since this is a significant problem that hampers workforce participation. Finally, the government can reform the criminal justice system. It should reduce the incarceration period, thereby raising labour force as most of the jailed men and women are classified in the primal categories.
In conclusion, the downtrend and stagnation in labour force participation rate is a problem that could affect the long-term economic growths in America. Policymakers and the economies are therefore urged to come up new reforms to encourage especially those at the prime age to join the workforce.