In looking for sources of lingering American economic sluggishness, economist Richard Vedder shares an interesting finding with Wall Street Journal readers.
What accounts for the slowdown? An important part of the answer is simple: Americans aren’t working as much today. And this trend reflects more than the recession and sluggish economy of the past few years.
The national income accounts suggest that about 70% of U.S. output is attributable to the labor of human beings. Yet there has been a decline in the proportion of working-age Americans who are employed.
In recent decades there was a steady rise in the employment-to-population ratio: For every 100 working-age Americans, there were eight more workers in 2000 than in 1960. The increase entirely reflects higher female participation in the labor force. Yet in the years since 2000, more than two-thirds of that increase in working-age population employed was erased.
The decline matters more than you may suppose. If today the country had the same proportion of persons of working age employed as it did in 2000, the U.S. would have almost 14 million more people contributing to the economy. Even assuming that these additional workers would be 25% less productive on average than the existing labor force, U.S. gross domestic product would still be more than 5% higher ($800 billion, or about $2,600 more per person) than it actually is. The annual growth rate of GDP would be 2.2%, not 1.81%. The retreat from working, in short, has had a real impact.
Why are Americans working less? Vedder points to four contributing factors: Food Stamps, Social Security disability payments, Pell grants, and extended unemployment benefits.
