Since the turn of the century, U.S. labor-force participation has been weakening. There have been numerous attempts to explain this phenomenon, with little agreement. Most of the theories have revolved around inadequate pay, increased safety net benefits such as disability payments, and the thought that a recovering economy would solve the problem by encouraging greater labor-force participation.
Currently, unemployment is at or near record lows, wages have begun to improve, with more and more companies announcing significant increases in their minimum pay rates, yet labor-force participation remains well below the January 2000 high of 67.3%. Labor-force participation rates in October and November were 62.7%, very close to recent lows. Why?
Consider the following. It is generally understood that child care can be a factor in employment decisions, and is a dynamic that has largely affected women. The importance of child care is certainly significant, but the consensus may be missing another big factor, home health care. Unpaid caring for impaired relatives, children, spouses and parents, is becoming an increasingly material factor in work-force decisions, particularly for women.
It is generally accepted that the U.S. is currently facing a labor shortage, particularly in areas requiring specific skills. If Americans continue to be unable or unwilling to return to the labor-force, it is going to be a significant factor in the outlook for economic growth.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®