Scott Winship of the American Enterprise Institute explores the factors driving many Americans away from work.

Why are fewer prime-age Americans in the workforce? Many popular explanations attribute Americans’ declining labor force participation to declining wages, technological change, and international trade. A new report from Joint Economic Committee Republicans’ Social Capital Project finds that these forces cannot fully explain increasing inactivity among able-bodied prime-age Americans.

Instead, many would-be workers are voluntarily disconnected from work, and government programs and policies have likely made work less attractive for these Americans. Beyond a paycheck, employment is also an important source of social capital that provides material and immaterial benefits to personal well-being. By evaluating the incentives workers face, the report recommends a number of policy reforms to lift barriers, remove disincentives, and increase the attractiveness of work.

Key Findings:

  • The U.S. has witnessed an unprecedented rise in disconnected prime-age workers over time. For men, this trend goes back half a century, with their labor force participation rate falling from over 97 percent in 1955 to 89 percent before the pandemic. For women, receding workforce participation began in the last two decades.

  • Many popular explanations blame declining wages, technological change, and international trade. However, key evidence indicates these forces have not made it significantly more difficult for workers to find well-paying jobs.

  • Examining worker preferences and their incentives provides a better explanation. The decline in prime-age labor force participation has been mostly voluntary. Only 12 percent of inactive, prime-age, able-bodied men said they wanted a job or were open to work. Among men who are inactive for reasons other than disability, retirement, education, or homemaking, 41 percent personally receive government assistance.

  • Government policies may be tipping the scales away from work. A growing number of Americans receive government assistance, which has been shown to lower employment. Regulations can also disproportionately harm low-skilled workers by creating unnecessary barriers to economic opportunity.