The White House last week said the rising number of non-working people in the country reflects an inevitable trend caused by an aging population, an attempt to rebut Republican arguments that the real problems are federal regulations and an oversized government.
The report from President Barack Obama’s Council of Economic Advisers also said little can be done to reverse the trend outside of allowing more immigrants to enter the country, which would help create a younger workforce.
Republicans have argued for years now that the private sector has limped along because of government interference through regulation, and an exploding national debt that companies see as a justification for potential tax hikes down the road. The GOP says these government threats are borne out in data that shows Obama has presided over an economy that failed to create jobs at rates seen in past recovery periods.
Republicans have passed dozens of bills aimed at slowing regulation and cutting spending, most of which have been ignored by the Democratic Senate.
But the White House report said the administration is not to blame for the falling labor force participation rate, which dropped from 65.9 percent in 2007 to just 62.8 percent in 2014. That’s a level that hasn’t been seen since the 1970s.
While the report admitted that the Great Recession played a role, it said most of that drop would have happened anyway.
“We find that the combination of demographic changes and the drop in labor force participation that would have been expected based on historical business cycle patterns explain most but not all of the recent drop in labor force participation,” the report said. “This implies that other factors, likely including both a continuation of pre-existing trends in labor force participation by certain groups and the unique effects of the Great Recession have also been important.”
The report is titled, “The Labor Force participation Rate since 2007: Causes and Policy Implications.” According to its analysis of the problem, more than half of the drop in the labor force participation rate — 1.6 points of the 3.1 percent decline — is due to an aging population.
“Because older individuals participate in the labor force at lower rates than younger workers, the aging of the population exerts downward pressure on the overall labor force participation rate,” the report said.
The report found that just 0.5 points of the total decline was due to the recession, and the remaining 1.0 points were due to a mix of other factors, including trends “that pre-date the Great Recession,” and the severity of the recession.
In total, the report found that about 70 percent of the historic drop in the labor force participation rate is due to “the aging of the population and increased retirements.”
The report said a plateau in the number of women joining the workforce also contributed, in addition to the retirement of some baby boomers.
While Republicans have said a government with a smaller footprint would help create jobs, the White House report said allowing more immigrants to enter the workforce would help, as would creating more flexible work policies.
“Probably the most significant policy response to the falling labor force participation rates is immigration reform, which would counteract the labor force effects of an aging population and spur economic growth,” it said.
But many Republicans have opposed this idea as one that would simply create jobs for non-Americans, instead of the millions of people who might re-enter the workforce if the jobs picture improved again.