The number of American adults not participating in the labor force has reached an all-time high of 105.8 million in June, exceeding figures from the COVID-19 pandemic and the Great Recession. This surge saw 832,000 individuals drop out of the labor force in June alone.
The definition of "not in the labor force" encompasses all individuals aged 16 and older who are not currently employed, including retirees, students, and those unable to work.
Key Demographics and Reasons for Non-Participation
Labor economist Nicholas Eberstadt noted a significant trend of men leaving the workforce. "We've got a big problem with the flight from work of prime-age men," Eberstadt stated. "What's been carrying the overall prime-age labor force participation has been the strong involvement of women, not men."
Approximately 5% of those not in the labor force, totaling 5.3 million people, have stopped looking for work due to discouragement or other reasons. Additionally, an estimated 22% of this population, over 23.3 million individuals, are receiving long-term illness or disability benefits. This is a larger group than those pursuing full-time education, which accounts for 16-18% of the non-labor force population, or approximately 19 million Americans.
Retirees constitute the largest segment, making up as much as 50% of those not in the labor force, which is attributed to the large Baby Boomer cohort entering retirement age. About 45% of retirees left the workforce at age 65 or later, with a smaller percentage retiring early.
Declining Labor Force Participation Rate
The labor force participation rate, which measures the proportion of Americans in the labor market, fell to 59% in June, the lowest point since September 2021. This rate had previously only dipped this low following the Great Recession.
Eberstadt also pointed to an increasing number of "dropouts"—healthy individuals choosing not to work or seek employment. He estimates about 7 million men aged 25 to 54 are currently out of the labor force. He also noted a similar trend among women, with approximately 3.5 million women neither working nor looking for work, and who do not have children or a spouse present in the household.
Global Comparisons and Contributing Factors
While an aging population is a factor, Eberstadt highlighted that other aging societies, such as those in Europe and Japan, are experiencing increases in their workforce participation rates, suggesting that aging alone does not explain the U.S. trend. He suggested that a complex and fragmented system of disability programs may contribute to individuals falling through the cracks. "The extent and the sprawl of participation or dependence upon different disability programs is a blind spot," Eberstadt said, noting the difficulty in tracking the full scope of benefit recipients across multiple programs.
Concerns About Universal Basic Income and Future Trends
Amidst discussions about artificial intelligence potentially displacing jobs, calls for a universal basic income (UBI) have emerged. However, Eberstadt expressed concern that UBI could exacerbate the issue of people leaving the labor force. He warned that while past technological disruptions primarily affected lower-skilled workers, AI might have a broader impact. Eberstadt cited his observations of men not working or seeking employment who spend significant time in front of screens, which he believes is detrimental and could lead to increased "deaths of despair."