AMERICA’S labour-force participation rate—the proportion of the population available to work—has been falling for years. The figure is now just 62.7%, the lowest level since 1977. The decline really sped up during the Great Recession, falling much faster than government wonks had predicted before the financial crisis hit (see first chart). How you interpret this trend has big implications for where American wages are going. So what is going on?
The obvious culprit for lower participation, of course, is the recession. As people lost their jobs and then struggled to find new ones, the argument goes, they decided to drop out of the labour force entirely. In other words, they no longer registered themselves as unemployed, or took early retirement,...Continue reading
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