Job Participation Rate Remains a Problem in U.S. Economy

Of the 8.5 million Americans that remain unemployed, 40 percent of those have given up looking for work. The job participation rate has fallen to a 37-year low.

Of the 8.5 million Americans that remain unemployed, 40 percent of those have given up looking for work. The job participation rate has fallen to a 37-year low.

One reason why the current employment rate is 5.4 percent is the number of people who have given up on the U.S. job market. Many people have been out of work for too long, making it harder to get back into the workforce. Data from a recent Harris poll shows that 55 percent of participants who had not worked for two years or longer have quit looking for work, while people out of work for 13 to 24 months fell into the 32-percent category.

Further, 34 percent of those who had not worked for seven to 12 months stopped searching, and 21 percent of people unemployed for three months or less has given up on the workforce. Extended unemployment benefits and a widening skills gap come into play, but the report also reveals that the U.S. job market needs vast improvement, and the numbers show that far too many people are suffering in an economy that is not strong enough to produce high-quality jobs that keep up with a higher standard of living.

For instance, according to a recent report from the National Low Income Housing Coalition, workers would need to make $19.35 an hour on average to afford a two-bedroom apartment nationally. Since the national minimum wage is $7.25 an hour, many cannot afford to keep pace with the cost of living, forcing many to take multiple jobs. In addition, a report from the Organization for Economic Cooperation and Development indicates that a single parent with two kids working on a minimum wage salary would need to work 50 hours a week to make ends meet.  The same person in the United Kingdom would only need to work 16 hours a week on minimum wage to rise above the poverty level.

While some in the American economy are doing better, many are forced to take low-skilled and part-time jobs that do not pay enough to earn a decent living. Some analysts believe that high-paying manufacturing/construction jobs will return, but in an age of globalization and automation, such a depiction looks bleaker by the day, and the current state of the economy appears to be the new normal. The U.S. job market has added an average of 182,500 a jobs a month since the recovery started five years ago, but little has been done in regards to structural reforms that can increase wages and get more people back in the labor force.