Back in 2015, GOP frontrunner Donald Trump called into the CBS show, “Face the Nation,” and claimed that Americans are living in a “false economy”, where the unemployment rate is actually 40 percent, rather than the 5 percent figure reported by the Department of Labor.
When we analyze the employment statistics using the broadest definition of unemployment, the proportion of people aged 16-and-older not in full-time jobs actually does stand at around 40 percent of the population. After almost two decades of decline, the U.S. labor force participation rate, the proportion of civilians (aged 16+) either employed or actively looking for work currently stands at a mere 63 percent.
Last year, I wrote an article on why increasing labor force participation was critical to achieving robust economic growth. In this article, I examine the reasons behind this trend of increased idleness and what this tells us about work opportunities and incentives.
Labor force participation can decline for both good and bad reasons. When taking into account rising school enrollment among 18-24 year olds, the downward trend in labor force participation among young adults starts to look less problematic. There is also a driving force at the opposite end of the demographic spectrum, with baby boomers dropping out of the workforce and entering retirement.
However, when we isolate a large portion of the population, we begin to identify the bad incentives at play in this increasing trend of idleness. Among men of prime working age (25 to 54), nearly all of the decline in labor force participation is attributable to a rise in the number of people who say they do not…