This content is provided by the Americans for Tax Reform Foundation
Two crucial but often overlooked indicators of the health of the nation’s economy are the related measures of the labor force and the labor force participation rate. The labor force statistic determines how many Americans are either employed or searching for employment (unemployed). Labor force participation measures the number of Americans in the labor force as a percentage of the civilian noninstitutional population.
The size of the labor force and the labor force participation rate are important insofar as they speak to a society’s productivity. When more citizens become workers, greater levels of prosperity can be achieved. Workers enter the labor force when conditions are favorable, and they leave when economic circumstances worsen.
An analysis of the presidency of Ronald Reagan with regards to the labor force yields positive results for the former president. Under Reagan, the labor force grew from 108 million workers to 123.4 million workers, a gain of 15.4 million workers. This figure is especially remarkable given that the US population grew by only 17.3 million during this time period. As the data show, the workforce grew at almost the same rate as the population under President Reagan.
Through May 2012, President Obama has been in office for 41 months. Over those 41 months, the labor force has grown by a mere 771,000 workers. In contrast, the economy added more than eight million workers in the first 41 months of Reagan’s presidency-over ten times as many workers. The measly growth of the labor force under Obama looks even worse when one considers that the US population has grown by 8.3 million under Obama. If the growth of the labor force had proceeded during the Obama administration as it did under Reagan, several million more workers would be a part of the American economy today.
The stark differences in the US labor market under Reagan and Obama are further demonstrated by labor force participation rate figures. Over the entirety of Reagan’s time in office, the rate increased by a striking 2.6 percentage points. In the first 41 months of Reagan’s first term, the labor force participation rate increased by .6 percent, from 63.9 percent to 64.5 percent. Over the same time period in Obama’s presidency, the figure dropped by 1.9 percentage points. At 63.6 percent in April 2012, the labor force participation rate was at its lowest point since 1981. With gender norms evolving and more women steadily entering the workforce, a rising labor force participation rate would be expected. Indeed, that phenomenon occurred up until Obama took office. Many economists and the Wall Street Journal have plausibly attributed the recent decline in labor force participation to “jobless and disheartened workers turning to disability benefits or reluctant retirement, or otherwise leaving the workforce for good.”
The staggering number of workers missing from the American workforce in the Obama era should be worrying to all those concerned with the health of the national economy. Without a change in the labor market akin to what was achieved under President Reagan, the United States could be headed down the road of becoming a less productive society.