There is brand new analysis that should be a warning for the present White House administration regarding workers in America. This analysis argues that government welfare policies actually encourage able-bodied men to opt-out of the labor force.
In the past, other factors included weak wage growth, technological change, or international trade as potential reasons for the low labor force participation rate among young men. In 1955, this segment of the population at work was 97%, but it has dropped to 89% in 2020.
Republicans on the Joint Economic Committee are now revealing in a report entitled “Reconnecting Americans to the Benefits of Work” that a significant portion of the young men who receive handouts from the government are “voluntarily disconnected” from work.
The report indicates that only 12% of inactive, prime-age, able-bodied men said they wanted a job or were even open to working. Among men who are inactive for reasons other than disability, retirement, education, or homemaking, there were 41% who personally receive government assistance.
The analysis also reveals that there is evidence suggesting that the labor force trends are being driven by workers and not employers. There is a decline in the prime-age labor force participation that has been basically voluntary. Three out of four disconnected men said that they do not want a job. More men are choosing to stay home with the kids, go to school, or retire early…and policymakers are growing concerned.
The report specifically names welfare as an important factor in explaining what is behind “voluntary” disconnection. There is growing empirical evidence that suggests government transfers, especially those without work requirements, will tend to lower employment. It has been proven that labor force participation and earnings fall after a person has received housing assistance, but losing Medicaid coverage increases employment. The introduction of the food stamp program in the 1960s and 1970s decreased employment significantly.
When there is a temporary income support trial, there is also an increase in the disincentive to work, this increases with the size and duration of the benefit.
Brad Polumbo, a policy correspondent, commented on the Foundation for Economic Education saying, “In the big picture, our labor participation problems can’t be fixed without serious rollbacks of the welfare state.”
The federal government spent over $5 trillion on the economic stimulus in response to COVID-19 and the lockdown-induced recession. This is in spite of the fact that there are 2.8 million more available jobs than workers willing to take them. And now, the Democrats in the Senate are attempting to pass a $1.75 trillion social welfare bill.
Some of the programs in this bill are a $400 billion universal preschool program, an expanded child tax credit that will last through 2022, and an expansion of Medicare to include dental and vision benefits.
There seems to be a majority of American voters who are very willing to receive additional COVID-19 stimulus checks. One petition for $2,000 monthly handouts received nearly three million signatures. And a survey from Quinnipiac University in January confirmed that 78% of Americans approved of the $1,400 checks supported by President Biden. This included 90% of Democrats and 64% of Republicans.
A.B. Atkinson, warden of Nuffield College, Oxford, wrote a book called “The Economic Consequences of Rolling Back the Welfare State.” He argues that Social Security and unemployment insurance provide “universal reduction in the uncertainty faced by individuals.” But it is hard to imagine a more uncertain time than right now. Many are looking to the mid-term elections to save the country from becoming even more addicted to the welfare state.
