This summer has been particularly concerning for American workers regarding the numbers of those “not in the labor force” (NILF), which reached a staggering 105.8 million in June, per government data. This is, without a doubt, a new record.
Interestingly, this high figure followed a notable increase, with about 832,000 individuals stepping away from the workforce in just that month. In fact, the current NILF numbers exceed those recorded during both the Great Recession and the peak of the COVID pandemic.
It’s worth noting that the term “not in the labor force” broadly includes all Americans aged 16 and older who aren’t currently employed, such as retirees and students.
Labor economist Nicholas Eberstadt has shed light on some troubling trends, especially involving men. He pointed out a significant dropout issue particularly among prime-aged men, linking this to the increasing workforce participation of women. Eberstadt is a prominent figure at the American Enterprise Institute.
Around 5.3 million of those NILF workers, roughly 5%, left school, reportedly due to either a lack of motivation or a disinterest in job searching. Notably, about 22% of the NILF group relies on long-term disability or similar benefits, translating to over 23.3 million individuals.
This number starkly contrasts with those in full-time education, which encompasses about 16-18% of the same age group, totaling just over 19 million in school.
Interestingly, retirees represent the largest portion of the NILF population, making up roughly 50% of this group. This isn’t shocking given the significant number of baby boomers reaching retirement age.
Of those not in the workforce, about 45% are retirees who opted for standard retirement after hitting 65, while 3-5% retire earlier.
While the absolute figure of NILFs is unprecedented, the share of Americans participating in the labor market fell to 59% in June, the lowest level since September 2021, when the economy began to recover from the pandemic. Before this, such a decline in labor force participation was only seen after the Great Recession.
DISCONNECT AND DROP OUT
Eberstadt has emphasized the increasing dropout rates among healthy Americans who are opting out of work altogether. He noted that about 7 million men aged 25 to 54 aren’t in the workforce at all. His 2016 book, “Men Out of Work,” explored this phenomenon further.
This issue, however, isn’t confined to men. Eberstadt also pointed out there are approximately 3.5 million women in similar situations—a worrisome trend indeed.
He describes a rising number of women who aren’t working or seeking work, often without children at home or partners to support them.
AMERICAN CHALLENGES
While some of these trends may be linked to the aging population, Eberstadt observed that other aging societies, like those in Europe and Japan, aren’t experiencing the same dropout issues. He noted that labor force participation there is on the rise.
“These are the healthiest, most educated Americans ever,” he remarked, suggesting that the U.S. faces a unique set of challenges. He believes that the increasing NILF population reflects a complicated web of disability programs that creates significant ‘blind spots’ for understanding how many Americans depend on various forms of support.
UBI IS NOT THE ANSWER
As artificial intelligence becomes more prominent in various industries, discussions around universal basic income (UBI) have intensified. This idea essentially proposes financial support for individuals regardless of employment status.
However, Eberstadt warns that UBI could exacerbate the dropout trends in the U.S. economy. He believes past disruptive technologies have been beneficial for skilled workers but have also displaced those lacking in skills. He argues that the trajectory of AI’s impact will likely repeat historical patterns.
Reflecting on the changes brought about by innovations like the internal combustion engine, he expresses concern about a guaranteed income system. “When I observe men who aren’t actively job hunting and what they’re doing instead, it’s rather disheartening,” he said. “These individuals aren’t engaging in civil life, helping around the house, or even leaving their homes.” He adds that many spend an alarming amount of time in front of screens, which could lead to a concerning increase in despair-related issues.
