Why Are So Many Working-Age Men Not in the Labor Force?

Summary

Although a growing share of working-age U.S.-born men inhabit the older and more-likely-to-be-retired end of the 16-65 age range, population aging explains relatively little of the decline in overall labor force participation among men who are 16-65. Instead, the decline is primarily due to young U.S.-born men who are less attached to the labor force than they were in years past. Immigration likely discourages their return to work.

Introduction

Labor force participation (LFP), defined as working or at least looking for work, has been trending generally downward among working-age (16-65) U.S.-born men. According to data from the American Community Survey, 81.7 percent of such men were in the labor force in 2000, compared to 77.5 percent in 2022.

What is behind the decline? One possibility is a cohort effect, in which people of specific ages are less likely to work nowadays compared to people of the same age in earlier decades. This would mean, for example, that a 32-year-old in 2022 is less likely to be in the labor force than a 32-year-old in 2000. A cohort effect is an age-specific problem, perhaps involving a decline in work ethic, and the solution involves finding ways to get young people back into the labor force.

“Stop blaming the young,” skeptics might say. Maybe the decline is instead due to a compositional effect, meaning that the 16-65 age range now contains a greater proportion of older men who have always worked less than younger men. Put another way, compared to 2000, proportionally more 60-somethings and fewer 30-somethings occupy the 16-65 range in 2022. If the problem of LFP decline is primarily compositional, then encouraging work will be effective only to the extent that older people are willing and able to do more of it than they did before.

The analysis presented below suggests that both cohort and compositional effects are influential, but cohort effects are the larger problem. If U.S.-born men between the ages of 16-50 could import their year-2000 LFP rates into 2022, over 80 percent of the decline in working-age LFP since 2000 would be eliminated.

Evidence

It is easy to demonstrate the compositional changes within the working age of 16-65. Figure 1 shows that middle-aged men, who tend to have high rates of LFP, are gradually declining as a share of the 16-65 group. In fact, men ages 61-65 now eclipse both the 41-45 and 46-50 groups. Given the much lower LFP among the 61-65 cohort, we should expect this compositional change to be one source of the overall LFP decline among men ages 16-65.

Figure 1. Proportion of U.S.-Born Men Ages 16-65 In Each Five-Year Age Cohort

Source: American Community Survey.

To investigate cohort effects, we can examine narrower age ranges within the broader 16-65 group. Figure 2 displays LFP trends among U.S.-born men whose age ranges are 21-25, 36-40, or 56-60. Cohort effects are obvious in all three groups. For men who are 21-25 or 36-40, LFP trends downward as expected, although there has been some post-Covid recovery. In the 56-60 group, LFP is low relative to the younger groups but has been trending fairly steadily upward, which complicates the analysis. In fact, a more detailed look at the evidence (not shown in the figure) reveals that the LFPs of all five-year age cohorts between 16 and 50 have been generally moving down, while the 51-65 groups have been moving up.

Figure 2. Labor Force Participation Among U.S.-Born Men, by Age Group

Source: American Community Survey.

Disentangling the compositional and cohort effects requires a simple trick demonstrated in Figure 3. First, the gray line shows the actual 4.2 percentage-point decline in the LFP rate from 2000 to 2022. The orange line then shows what happens if LFP rates by age in 2000 are held constant and then applied to the changing age structure in subsequent years. By 2022, the decline has been cut in half to 2.1 percentage points. Therefore, it would seem that about half of the observed decline in LFP is due to aging within the 16-65 group (compositional effect), and the remaining half is due to changes in LFP at specific ages (cohort effect).

Figure 3. Labor Force Participation Among U.S.-Born Men Ages 16-65 In Different Scenarios

Source: American Community Survey; author’s calculations.

There is an additional complication, however. Recall that not all five-year age cohorts within the 16-65 range have seen declining LFP. The older parts of that range have actually grown more attached to the labor force over time. The cohort effect is therefore a mixed bag. Holding year-2000 LFP rates constant, as the orange line does, improves the LFP of the younger part of the 16-65 age range in 2022 but worsens it for the older part. What if we could have the best of both worlds, in which younger men (ages 16-50) maintain their year-2000 LFP, but older men (51-65) are allowed to improve just as they have? The blue line in Figure 3 shows what happens. The overall LFP decline between 2000 and 2022 is cut from 4.2 points to 0.7 points, eliminating 82 percent of the problem.

Discussion

The findings above show that declining LFP among working-age U.S.-born men cannot be ascribed simply to aging within the 16-65 age group. The main problem is that younger men within that group (age 16-50) are less attached to the labor force than they once were. This is a fundamental social problem that cannot be explained away by compositional effects. As the Center has emphasized, labor-force dropout is concentrated among less-educated men and is associated with a host of social problems, including welfare dependence, drug abuse, and lower life expectancy.

Policymakers sometimes suggest importing immigrants to inject more youth into the working-age population. However, given the cohort effect of younger men dropping out of the labor force, it should be clear that immigration is not a satisfactory solution to that problem — in fact, it could exacerbate the issues faced by U.S.-born men. The reason is that men without work do not disappear when immigrants arrive; rather, their problems only become easier to ignore, as business leaders fill vacancies with immigrants rather than press policy-makers to address labor-force dropout among the U.S.-born.

Of course, just because young U.S.-born men are primarily responsible for the decline in work among the working-age population does not mean that an aging society is nothing to worry about. As the population becomes more elderly, the proportion who fall entirely outside the traditional working-age of 16-65 will increase. The role of immigration in addressing that problem is a larger issue that the Center has discussed elsewhere.