US Economy

A Policymaker’s Guide to Labor Force Participation

February 4, 2019  • Keith Hennessey & Bruce Reed

Authors

Keith Hennessey, Lecturer, Graduate School of Business, Stanford University
Bruce Reed, CEO and Co-founder, Civic LLC

Working Group Members

  • David Cote, GS Acquisitions Holding Corporation
  • Brian Deese, BlackRock
  • Danielle Gray, Blue Cross Blue Shield of North Carolina
  • N. Gregory Mankiw, Harvard University
  • Magne Mogstad, Booth School of Business, The University of Chicago

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Abstract

Labor force participation among prime-age workers has been declining for many decades. This memo aims to provide policy makers with a useful framework for thinking about the question: “Why are so many people deciding that seeking work isn’t worth it?” After reviewing relevant facts and trends about labor force participation in the United States, we consider plausible explanations for the causes of decline. We identify 20 potential explanations for low and declining labor force participation and ultimately conclude that there is still too much uncertainty about the causes of the decline, and thus it is difficult to quantify the expected benefits of any particular policy change. We conclude with five policy approaches to increase prime-age labor force participation.