Why Are Prime-Age Workers Disappearing From The Job Market?

Economists want to know why prime-age workers, people 25-54, aren't working. Mary Louise Kelly talks to David Wessel of the Hutchins Center on Fiscal & Monetary Policy at the Brookings Institution.

MARY LOUISE KELLY, HOST:

Fewer and fewer Americans are working or even looking for work. Part of that decline is no mystery - all those baby boomers retiring. What is vexing economists is that prime working-age Americans, ages 25 to 54, they are also falling off the job map. To find out why, we've called our regular economics commentator, David Wessel. He's at the Brookings Institution and also writes for The Wall Street Journal. Hey there, David.

DAVID WESSEL: Good morning.

KELLY: Good morning. When we say many working-age Americans are in fact not working, put a number on that for us.

WESSEL: Well, 30 years ago, about 1 in every 16 men between ages of 25 and 54 wasn't in the job market, wasn't working, wasn't looking for work. Today, it's about 1 in 8. Now, the story for women is different. In 1950, about two-thirds of the women weren't in the workforce. By the late '90s, about a quarter of the women were not in the workforce. And what happened then, which is a bit of a puzzle, is it leveled off. So we still have about 1 in 4 women in this age bracket who isn't working or looking for a job.

KELLY: OK, so 1 in 4 women, 1 in 8 men not working, not looking for a job, although they are of prime working age. Do we know why?

WESSEL: Right, it's a good question. I mean, these people are too old to be in school and not old enough to be retired. Some of them have given up looking for work. This always happens in a recession. But usually when the economy gets better, more of them come back, and that hasn't happened this time. Some of them must figure that they can't. It's not worth getting a job. Wages for low-skill workers are so low that it's not worth the hassle and expense. Some are being supported by working spouses. And we know a larger number of people are on the Social Security Disability Insurance program, which has kind of become the income of last resort for people who can't find any other income.

KELLY: Is one other possibility that some people are working but in ways that is not captured by the government? I'm thinking of the guy who drove me to work this morning in his Uber car, or people who are renting out their places on Airbnb, for example.

WESSEL: Well, it's hard for the government to come up with surveys that adapt to the changing economy. But we believe that people who work for Uber, even though they're independent contractors, when the government asks them are they working, they say yes. So something like Airbnb where you're renting out a spare bedroom, those people are probably not counted as working.

KELLY: You mention that these numbers have fluctuated over the decades. How unusual is this number historically - big picture?

WESSEL: It's unusual. You know, in most societies, prime working-age males are on the job or at least looking for work. And the fact that it's coming down in the U.S. is alarming. It means that we'll have fewer people working, contributing income to help pay for retirees and stuff. So it is unusual and it's disturbing because we can't quite figure out why it's happening or what to do about it.

KELLY: Can we figure out what impact it might have on the economy going forward?

WESSEL: Oh, yeah. The economy will grow more slowly if there are fewer people working. We know that people who don't work tend to have less self-respect. They don't feel part of the society. It maybe account for some of the agitation we see in the presidential election. And importantly, economically, it means there's fewer people paying taxes to help support the people who are no longer able to work.

KELLY: Paying Social Security and everything else.

WESSEL: Exactly.

KELLY: All right, thank you, David.

WESSEL: You're welcome.

KELLY: That's David Wessel. He is director of the Hutchinson Center at the Brookings Institution. He also writes for The Wall Street Journal, and he is a regular guest right here on this show.

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