On Wednesday, February 12, 2020, Federal Reserve Chairman Jerome Powell challenged the theory that our “generous” public assistance programs were encouraging able-bodied adults to stay out of the workforce. The comments came during a Senate Banking Committee hearing.
Senator John Neely Kennedy (R-LA) was asking about why the labor participation rates among adults is not higher despite full employment. After probing about trade policy, he asked whether or not, we do not have “increasing labor force participation here [in the United States] because of the richness of our social programs.” Powell responded that “ it’s very hard to make that [case] if you look in real terms, adjusted for inflation, at the benefits that people get [public assistance] it actually declined during this period of decline and have not gone up in real time. So, it isn’t better or more comfortable to be poor and it is actually worse than it was.”
When pressed by Kennedy, Powell said “our education rates have fallen relative to our peers.” Particularly when it comes to lower- and middle-income workers and it has not always been that way. He also talked about globalization and high technology that advantage people with higher education levels because manufacturing requires fewer and more high-skill individuals. He also said that he felt the opioid crisis has also played a role in reducing participation.
Experts have been trying to determine why so many adults remain on the sidelines, especially in a good economy. According to the latest Labor Department data, about 83 percent of American adults in their prime worker years (ages 25 to 54) are participating in the labor force, meaning they have a job or are actively looking for one. That’s up from a few years ago, but still below the levels of the late 1990s and below the rates of Germany, Japan, Canada, France and the United Kingdom. This is a prime part of workforce participation because it is a group that would not be looking toward retirement or full-time education.
According to a report by the Washington Post, the vast majority of economists agree with the Chairman Powell. That same news report said, “Since the major bipartisan effort to revamp welfare in 1996, it’s become much harder to receive money from the government unless you are either working or disabled.” According to the POST, Matt Weidinger, Rowe fellow in poverty studies at the American Enterprise Institute said, “Benefits really haven’t been growing. What we have been doing is subsidizing people who go to work.”
The POST article also includes comments by Danilo Trisi, a senior research analyst from the Center on Budget and Policy Priorities, who said that U.S. labor force participation has been falling since 2000 while many European nations with more generous safety nets have seen labor-force participation rise over the same time period.
Some analysts suggest it’s really a different problem for men and women. The female labor force participation has edged down since 2000 (although it started to rebound), but male labor force participation has been falling since the 1950s.
There have been studies in recent years examining the impacts of a changing economy and it potential impact on both mortality rates and job participation. In March 23, 2017 Princeton University researchers and economists released a study on trends of increased mortality rates among some lower income, less-than-college educated white populations.
The study, Mortality and morbidity in the 21st century, by Anne Case and Angus Deaton indicated that middle-aged non-Hispanic whites in the U.S. with a high school diploma or less have experienced increasing midlife mortality since the late 1990s. They trace this to both rises in the number of “deaths of despair” (death by drugs, alcohol and suicide) and to a slowdown in progress against mortality from heart disease and cancer, the two largest killers in middle age. The research showed that mortality rates are declining for Hispanic and blacks and is falling for whites with a college degree.
The same trend for individuals without college educations is not present in comparable European countries and in fact it is decreasing faster for lower income populations compared to higher income European populations although it is falling for both. The two authors suggested that the key factor may be the lack of economic opportunity at the time of entry for whites with low levels of education.
Regarding, Temporary Assistance for Needy Families (TANF) CWLA has testified and written about the need for strengthening TANF as a part of assistance. In 1996, when Aid to Families with Dependent Children (AFDC) was converted into TANF, 68 of every 100 poor families received AFDC assistance. Twenty years later (2015) only 23 out of every 100 poor families where receiving cash assistance from TANF. In addition, “deep poverty”—earnings of less than half of the federal poverty level (about $12,000 for a family of four)—affected 19.4 million people in 2015, 6.5 million of them children under the age of 18. Over that same time period TANF has lost more than one-third of its value due to inflation. In 2018 only 21 percent of total TANF spending was being used by states to provide cash assistance.