No Free Lunch: Economics for a Fallen World: Third Edition, Revised
Chapter Eighteen: The “macro” view of the economy 461 There are many reasons for this drop, and economists struggle to determine the exact split, although there are analyses that attempt to do so. A large reason for the downward trend, which pre-dated the recession, is the changing demographics of baby boomers retiring. When people leave the labor force because they are financially prepared for retirement, this is not necessarily a bad thing! But other reasons are more troubling, such as the expansion of people on social security disability, as this report from the Richmond Federal Reserve Bank shows. We can clearly see in Figure 18.7 that demographic changes are not the only reason for the drop in the labor force participation rate. Figure 18.6, Labor Force Participation Rate. Labor Force Participation rate has fallen to the lowest level in over 30 years, with an especially sharp drop after the recent recession. Figure 18.7, Labor Force Participation rate, Prime Age Workers. The drop in the Labor Force Participation rate is not simply due to demographics as baby boomers retire. Looking at prime age workers suggest the labor market is more difficult since the recession.