From The Wall Street Journal:

The unemployment rate, the figure that dominates reporting on the economy, is the fraction of the labor force (those working or seeking work) that is unemployed. This rate has declined slowly since the end of the Great Recession. What hasn’t recovered over that same period is the labor force participation rate, which today stands roughly where it did in 1977.
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If you think the answer is that Baby Boomers are retiring, you would be partially wrong.  Experts say that perhaps 25% (some say 50%) account for the decline in labor participation.
Another explanation is the large number of workers who have applied for disability, and the extension of unemployment benefits remove some of the incentive to work.  The extended periods that some workers depend on unemployment, keeping them out of the work force, also make them less attractive to potential employers.
Other interventions by the government have not helped.  Two of those are the ACA (Obamacare) and the Federal Reserve’s money policies.

As I see it, the policy response to our disturbing doldrums in the labor market has indeed struck the wrong balance. Whatever can be said for shorter-term measures to jump-start job creation and business activity, it seems clear by this late date that our problems are in no small part structural. What we need most urgently is to rethink the federal government’s wider role in the labor market. The importance of structural problems doesn’t imply that policy can play no role beyond conventional fiscal or monetary policy.

A thoughtful editorial, written by Mr. Glenn Hubbard, the dean of Columbia Business School
Read the complete editorial at The Wall Street Journal

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