Depth report

　　

In 2014, 12% (nearly one in eight) of American men in the prime of life (25 to 54 years old) neither had a job nor were looking for a job. This is very close to Italy's ratio, and much higher than the other members of the Group of Seven (G7): Britain is 8%, Germany and France are 7%, and Japan is only 4%.

    In the same year, the proportion of American women who were neither working nor looking for a job was 26%, which was basically the same as Japan, but only lower than Italy. For American men and women in the prime of life, whose income should be an important responsibility, the labor market in the United States has performed extremely poorly. So, what happened?

    There may be two opposite reasons for the decline in the unemployment rate: the popular reason is that people have found a job, and the unpopular reason is that people have given up looking for work.

Fortunately, in the United States, the former factor has surpassed the latter since the crisis. Since reaching a peak of 10% in 2009, the overall unemployment rate has fallen by 5%. On the whole, the unemployment rate will not fall more than a quarter due to the fall in the labor participation rate. The relative performance of the US unemployment rate is also very good: in September 2015, the US unemployment rate was similar to that of the UK, slightly higher than Germany and Japan, but well below the 10.8% of the Eurozone as a whole.

    Then, by the standards of similar countries, the performance of cyclical unemployment in the United States is at least very good. However, as the President of the United States pointed out in the 2015 Economic Report, the labor participation rate in the United Kingdom has not seen any decline after the Great Recession, despite the fact that the aging trend in the United Kingdom is similar to that in the United States. similar. Even from a cyclical perspective, the decline in the labor force participation rate in the United States is worrying. However, the most worrying thing must be the longer-term trend. This is especially true for mature adults.

    The labor participation rate of middle-aged women is equally astonishing. In the United States, the female labor force participation rate continued to rise strongly until 2000, and was already at a leading level by the year 2000. Among the G7 member states, only the US has experienced a continuous decline in the labor force participation rate of middle-age women. Japan was once far behind, but now it has caught up.

    How to explain the long-term withdrawal of American men and women from the labor market on such a large scale? It cannot be a reasonable explanation that leisure can also live comfortably, because among high-income countries, the US welfare system is the least generous. It is unlikely that the higher minimum wages hinder job creation and thus make low-skilled workers give up looking for work. According to OECD data, in 2014, the actual minimum wage in the United States was 20% lower than that in the United Kingdom and far below the generous level of France. In addition, among the OECD, the labor market supervision in the United States is the loosest.

    How to explain these trends? As far as mature women are concerned, the lack of affordable childcare services seems to be a reasonable explanation. The society is obviously determined and does not want to pay to keep women in the workplace.

    Another possible explanation is that the flexibility of the labor market allows employers to replace middle-aged workers with young and old. The labor force participation rate of people aged 15 to 24 in the United States is relatively high. At the same time, the labor participation rate of people over 65 in the United States has risen sharply-from 13% in 2000 to 19% in 2014. Among the G7 members, the United States only lags behind Japan. For laborers living in American megacities, lower minimum wage levels and high transportation costs may also make low-wage jobs uneconomical. Especially for men, mass incarceration has produced a large population with criminal records, which may also help explain why it is difficult for them to find a job and exit the labor market.