Jay ShambaughProfessor of Economics and International Affairs, The George Washington University
Mr. Chairman, Madame Vice Chair, Members of the Joint Economic Committee, thank you for inviting me to discuss this important topic today. Getting more people into the labor market and into jobs is a central part of generating broadly shared growth and raising living standards.
The United States—which used to be a world leader in labor force participation for both men and women—now substantially lags many other advanced economies.
Although the overall U.S. labor force participation rate has been stable since approximately 2015, it had been on a downward trend beginning in the year 2000. Much, but not all, of that decline is attributable to the aging of the population as more adults are retirement age. Looking across age groups: younger adults are participating less than in the last century, largely because more of them are in school; adults over 55 are participating at higher rates than in the late 1990s; participation for those aged 25–54 has been rebounding since 2015, but is still below its 1999 peak. There is room in the labor market for participation to rise.
Economists often focus on those of “prime” working age, between 25 and 54, as they are usually neither in school nor retired in large numbers. Prime-age men have seen a persistent downward trend in participation over the last half century, largely due to declining rates among men with less education. Research has shown that this group has seen a decline in demand for their labor, and prime-age men with less than a high school education actually make $3.40 less an hour (adjusted for inflation) than they did in 1980...