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Where Have the Workers Gone?


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Businesses complain incessantly these days of labor shortages. Rising wage rates would seem to induce more people to seek paid employment, and they have to some extent.

Still, a historical shortfall exists in the percent of the population at work or actively seeking employment, a shortfall that has limited the economy’s growth potential. Because the problem mostly reflects the retiring of the huge baby-boom generation, this troublesome worker shortage seems likely to persist, probably to the end of the decade.

Labor Department statistics tell the story. Some 15 years ago, about 67 percent of the civilian population were either working or actively seeking work. This so-called “participation rate” began to fall after the Great Recession of 2008-09 and continued to do so until it fell below 63 percent in 2016. Stated in percentages, this seems like a small change, but in a population of just under 350 million, this drop in participation effectively denied the economy some 14 million workers. It is little wonder then that the economic recovery during those years proceeded as slowly as it did.

Participation rates picked up marginally as economic growth accelerated between 2016 and 2019 but then plummeted during the pandemic, hitting a low of less than 62 percent in 2020. They have picked up since to near 62 percent but remain a full percentage point below the late 2019 level, a loss of just under 3.5 million workers and clearly a contributor to the present, constraining worker shortage.

Some have attributed this drop in worker participation to the shocks of first the Great Recession and then the pandemic. Those with a moral turn of mind have attributed it to a loss of the work ethic among the younger generation.

Without disputing either of these explanations, it is more likely that the drop in participation reflects retirements among those in the huge baby-boom generation. The oldest of that large part of the population reached 65 in 2010. Since then, an increasing number of boomers has retired, a fact that not only explains the decline in worker participation but also that it began right after the 2008-09 recession.

The participation decline was not because Americans generally avoided work but rather because between 2010 and 2020, the aging boomers raised the part of the population of retirement age (65) from about 13 percent to about 16.5 percent.

Proof of this effect lies in the participation data for each age group. Every age category showed a rise in participation. The teen rate rose from 36 percent to just under 37 percent during the past year. People between the ages of 20 and 54, the backbone of the workforce, saw their rate rise from barely over 81 percent to 82.5 percent. Even older Americans increased their participation in the workforce. The rate for those over 55 rose from 38.2 percent to 38.9 percent.

But even as each group increased its participation, the relative growth of older groups, which for obvious reasons have a lower participation rate than younger Americans, has held down the overall participation rate.

This demographic weight on the nation’s available workforce will almost certainly persist. The huge baby-boom generation was born between the years 1945 and 1962. The bulk of those born in those early years has already retired. Those born in the later years should seek to exit work during the next five or six years.

Since more were born in the later years of the boom than in the early years, the worker shortage should intensify as the decade proceeds. Because the economy moves in cycles, the pressure will undoubtedly develop unevenly, but on balance, the demographics promise that this participation matter will get worse, not better, over time.

Nor is there much the economy can do to alleviate this pressure. A higher rate of women’s participation might help. Because women participate in paid work at a lower rate than men—58.0 percent compared with 70.5 percent—there would seem to be room for women in the right circumstances to raise their participation and give the economy the working hands and minds it needs. Immigration could help, too, though to do much good, it would have to be of the sort that can replace the relatively well-educated and well-trained baby boom generation.

Given the limits on these mitigators, the labor shortage seems likely to continue for quite a while yet.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

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Milton Ezrati is a contributing editor at The National Interest, an affiliate of the Center for the Study of Human Capital at the University at Buffalo (SUNY), and chief economist for Vested, a New York-based communications firm. Before joining Vested, he served as chief market strategist and economist for Lord, Abbett & Co. He also writes frequently for City Journal and blogs regularly for Forbes. His latest book is “Thirty Tomorrows: The Next Three Decades of Globalization, Demographics, and How We Will Live.”



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