Biden says CHIPS Act will create more US jobs, grow economy
An earlier version of this story incorrectly stated the CHIPS and Science Act was signed into law.
Claire Hardwick, USA TODAY
Wanted: About 2.7 million male workers in their prime working years.
A big reason many employers are still struggling to find qualified job candidates is that the share of Americans working or looking for jobs is at 62.4%, well below its pre-pandemic level of 63.4%.
Most of this shortfall in labor force participation can be traced to people 55 and older, both men and women, who retired early during COVID in response to a layoff, to minimize health risks or for other reasons.
But a less publicized factor is that men ages 25 to 54, have been dropping out of the workforce for decades. Their participation rate rebounded somewhat from 2017 to 2019 as unemployment fell and wages increased in a vibrant labor market. But it slid during the health crisis and has yet to fully recover despite record job growth over the past two years.
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What is the labor force participation rate for 25 to 54?
In January, the share of 25- to 54-year-old men working or job-hunting was at 88.5%, below the pre-pandemic mark of 89.2%. By contrast, the participation rate for women in that age group had climbed to 76.9%, effectively back to its pre-COVID level of 77%.
If the participation rate for prime-age men was at its 1990 level, there would be an additional 2.7 million of them in the workforce, estimates economist Justin Begley of Moody’s Analytics.
And that could mean a big shot in the arm for the economy.
How men leaving workforce contributes to Fed increasing interest rates?
Boosting the nation’s supply of workers could go a long way toward easing inflation and convincing the Federal Reserve to pause its aggressive campaign of interest rate hikes.
Fed Chair Jerome Powell has said goods inflation is already moderating but officials are focused on slowing price increases in service industries, like health and education, which are tied to rising labor costs.
The Fed’s rate hikes are intended to raise business borrowing costs, thus curtailing hiring and investment, but most economists believe they’ll tip the nation into a recession this year.
By contrast, expanding the pool of workers would be another way to bring the labor market into better balance and slow pay increases without sharply reducing job openings or increasing layoffs.
“The best way to achieve a loosening in the labor market would be to increase labor supply,” Begley and Moody’s economist Matt Colyar wrote in a recent note to clients.
Why did so many US men stop working?
Economists have long put much of the blame on the offshoring of manufacturing jobs to China, a trend that picked up steam in the early 2000s after China joined the World Trade Organization, Begley and Colyar note.
A 2021 study by the Federal Reserve Bank of Richmond also cites a rise in male substance abuse and even heavy video game use.
Another study several months ago by the Federal Reserve Bank of Boston cites a less obvious reason: Non-college-educated men have left the labor force in greater numbers as the shortfall in their wages compared to college-educated men has increased, the study says.
From 1980 to 2019, non-college-educated men’s median weekly earnings fell 17% after adjusting for inflation while pay for their college-educated counterparts increased by 20%.
“This finding suggests that deteriorating social status is a plausible key factor,” the Boston Fed paper concluded.
In other words, the lower self-esteem associated with a lower social status has caused some men to simply drop out rather than cope with the stress.
It’s unclear how they’re generating income but some may be relying on a spouse’s earnings or doing occasional work that’s not recorded by Labor Department surveys.
Other men leave the labor force to go back to school and bolster their skill set while still others are hampered by a disability, the paper said.
Why are wages increasing?
Over the past couple of years, however, the tide has turned somewhat. Lower-wage workers have benefited from larger pay increases than higher-wage employees – narrowing the gap between the two groups — as industries such as restaurants, hotels and retail struggle to find employees.
Workers with a high school education or less reported annual wage growth of 6.7% in January, compared with a gain of 5.9% for those with a Bachelor’s degree, according to Begley and the Federal Reserve Bank of Atlanta.
Higher pay should be prodding at least some less educated, lower-wage workers to return to the labor force.
“The opportunity cost of not working grows as wages increase,” Begley says.
While that has happened to some extent, the gains have not been significant so far, he says.