How we can repair the labor market, in one chart

Graph showing percentage of population in labor force.
(Image credit: Labor Department via Atlanta Fed/Courtesy Wall Street Journal)

One big question mark in the recovery from the Great Recession is people who are out of the labor force entirely — they're not employed and they're not looking for work. They've been growing as a portion of the American population since the late 1990s, and spiked after the Great Recession. So everyone's wondering if this shift is permanent, or if a lot of these people can be brought back in.

A new analysis by The Wall Street Journal suggests a fair number of them can.

(Graph courtesy of The Wall Street Journal)

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A lot of people dropped out of the labor force either by staying in school or by retiring early. Neither solution is great: more education comes with more student debt, and early retirement means reduced benefits. But they may be the best option for people when jobs are scarce. Obviously, we may run out of time to get early retirees back into the labor market. But a lot of people in school can obviously be brought back in, if we get job growth going again.

Another big story here is the rise of disability as a form of early retirement (in light blue). There's a fair amount of evidence disability benefits have risen to offset the decay of workers' compensation programs. But disability itself is also relative: If you've injured your back and can't do manual labor, but a lackluster economy means there are no desk jobs in your community, or it's too late for you to acquire the skills for a desk job, then you're disabled for all intents and purposes. So this category is at least somewhat amenable to more robust job growth as well.

In short, with the right macroeconomic policies to restore job growth and full employment, there's every reason to think labor force participation can be brought back up.

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