Low Participation Rates Are Hurting the U.S. Economy

falling economy

Unemployment Doesn’t Tell the Whole Story

While recent figures on unemployment have painted a brighter picture of the U.S. workforce, these numbers don’t cover the thousands of Americans of working age who have dropped out of the labor force.

In May, unemployment hit a decade-low at 4.3%, a rate so low in fact that the U.S. has not experienced such high employment rates since 2001. (Source: “For America, full employment is no longer full enough,” Financial Times, June 5, 2017.)

But what the number doesn’t encompass are the thousands of Americans of working age who have dropped out of the labor force for a variety of reasons. The labor participation rate is the lowest it has been since the mid-1970s, and that was when the U.S. was still transitioning towards a more gender-balanced workforce. (Source: “United States Labor Force Participation Rate,” Trading Economics, March 2017.)

A recent column in Financial Times believes that it comes down to several issues that have been plaguing the American economy for years now.


The first is globalization and innovation. While the U.S. has been losing middle-class manufacturing jobs for years—as demonstrated by the collapse of the Rust Belt and manufacturing cities like Detroit—the process has only continued to speed up in recent years. Part of the reason Donald Trump won the presidency was his ability to speak to people in these areas and promise to return these jobs, though there is a lot of disagreement over whether he will achieve that goal.

Innovation has arguably played a larger part in the reduction of manufacturing jobs and low-skill employment. As our machines continue to develop and outpace us in a number of fields, robots will look to replace humans at a faster pace than ever witnessed before.

Another issue is the impact of drugs and crime. The U.S. has long been known as the largest carceral state in the world. The U.S. imprisons people at a rate of 724 per 100,000. Russia is second on the list with 581 per 100,000. (Source: “World Prison Populations,” BBC, last accessed June 8, 2017.)