A new analysis argues that government welfare policies encourage able-bodied men to opt out of the labor force.
Many point to weak wage growth, technological change, or international trade as potential explanations for the low labor force participation rate among young men — which has dropped from 97% in 1955 to 89% in 2020. However, Republicans on the Joint Economic Committee argue in their “Reconnecting Americans to the Benefits of Work” report that a significant share of the young men who receive handouts from the government are “voluntarily disconnected” from work:
Only 12 percent of inactive, prime-age, able-bodied men said they wanted a job or were open to work. Among men who are inactive for reasons other than disability, retirement, education, or homemaking, 41 percent personally receive government assistance.
One key piece of evidence that suggests labor force trends are driven largely by workers, not employers, is that the decline in prime-age labor force participation has been mostly voluntary, as told by the men themselves. Three out of four disconnected men say they do not want a job, and only 12 percent of inactive, prime-age, able-bodied men said they wanted a job or were open to it in 2014. If more men are genuinely choosing to stay home with the kids, go to school, or retire early, policymakers should not be concerned.
The report names welfare as an important explanatory factor behind the “voluntary” disconnection:
A significant body of empirical evidence suggests that government transfers — especially those without work requirements — tend to lower employment. For example, labor force participation and earnings fall after receiving housing assistance, losing Medicaid coverage increases employment and gaining the coverage can reduce it, and the introduction of the food stamp program in the 1960s and 1970s decreased employment significantly. A series of temporary income support trials also find that disincentives to work generally increase with the size and duration of the benefit, although the effects are often smaller than predicted.
“In the big picture, our labor participation problems can’t be fixed without serious rollbacks of the welfare state,” commented Foundation for Economic Education policy correspondent Brad Polumbo.
In response to COVID-19 and the lockdown-induced recession, the federal government spent over $5 trillion on economic stimulus. Even though there are 2.8 million more available jobs than workers willing to take them, Democrats in the Senate are attempting to pass a $1.75 trillion social welfare bill.
Among its programs are a $400 billion universal preschool program, an expanded child tax credit that will last through 2022, and an expansion of Medicare to include dental and vision benefits.
American voters also signal a high willingness to receive additional COVID-19 stimulus checks — with one petition for $2,000 monthly handouts receiving nearly three million signatures. A survey from Quinnipiac University in January confirmed that 78% of Americans — including 90% of Democrats and 64% of Republicans — approved of the $1,400 checks supported by President Biden.