How to ease the labor shortage by fixing the social safety net
The United States is in the enviable position of having a labor force crunch: Too few workers chasing too many jobs. There is no shortage of speculation among economists about solutions to this labor shortfall. But one factor that could help, and is too often ignored, is the ways our nation’s current safety-net system prevents people from entering the labor market.
First, let’s consider the context we’re in. The U.S. unemployment rate has settled below 4 percent for over two years, the longest stretch since the 1960s. Even so, our labor force participation rate continues to lag, caused in part by an aging population, declining birth rates, and aftereffects of the pandemic.
In January 2000, the labor force participation rate was 67.3 percent. Today, it’s 62.8 percent. That might not sound like much on paper, but consider that it means 1.7 million Americans are still missing from the labor force compared to right before the pandemic alone. These are able-bodied, prime-age workers—defined as ages 25 to 54—and they are still on the economic sidelines.
What’s worse, the labor force participation rate is expected to decline even further to around 60.4 percent by 2032, according to estimates from the U.S. Department of Labor. On the flip side, consider that by 2023, 41 million Americans relied on food stamps to make ends meet and nearly 90 million Americans were enrolled in Medicaid.
These are the numbers and statistics, but they represent real human beings who are being left behind. One way to bring more individuals back into the labor market is by implementing badly needed reforms to our nation’s social safety net.