by Paige Terryberry
Senior Analyst for Fiscal Policy, John Locke Foundation
The latest Senate Joint Economic Committee study provides further evidence we should be rolling back, not growing, the welfare state.
The report shows that workers are increasingly leaving the labor force and offers some common arguments, and then debunks them:
While some of these arguments are valid in small parts (i.e. the disproportionate effect of trade is shown to negatively affect some manufacturing workers) the authors argue the reason for the broader decline is government-issued disincentives.
Workers, not employers, are driving the disconnect. Most of those leaving the labor force do so voluntarily.
Inactivity is on the rise, especially for men: “In 2019, there were four times as many prime-age men out of the labor force as there were unemployed and looking for work.” For men, the increase goes back decades. The rise in dysconnectivity for women is more recent.
The labor force participation rate for prime working-age men was 89% before the pandemic (see graph). The rate was 97% in 1955.
The report exposes that “among men who are inactive for reasons other than disability, retirement, education, or homemaking, 41 percent personally receive government assistance.” Those that do not fall into those buckets of disability, retirement, etc. are not only dependent on other taxpayers in the economy but are prone to depression and social isolation.
Inactivity is driven by government programs and bolstered by onerous barriers and regulations.
And, unfortunately, the increased attractiveness of federal and state welfare harms low-income families most.
Activity in Washington would have you think the opposite trends are occurring. Massive spending and expansion of government “help” threaten to further exacerbate these trends. Today, the Bureau of Economic Analysis released third-quarter GDP data showing a shocking decrease in the growth rate this quarter. During a time of recovery, this is especially troubling. The labor force also decreased in September, and The Wall Street Journal reported that “some economists say labor-force participation, or the share of Americans working or seeking a job, will never return to pre-pandemic levels.”
Democrats in Congress plan to spend money we do not have on massive new subsidies. They should read the JEC report.