Summary:
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According to a paper that will be discussed at the Brookings Papers on Economic Activity (BPEA) conference on March 30, long COVID, fear of contracting COVID, and Americans’ shifting priorities for the balance between work and personal activities may account for more than half of the decline in the U.S. labour force participation over the past three years.
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“According to the authors, long COVID, which causes symptoms like extreme fatigue, shortness of breath, muscle weakness, and mental fog months after the initial infection, could account for 10% of the decline in hours and about half of the 1.4 million worker participation shortfall at the end of 2022. According to the authors, “a reevaluation of the balance between work and other activities also may be part of the explanation.
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“They contend that demographic inequalities in involvement are consistent with that final hypothesis.
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A more significant percentage of older persons, many homeowners who benefited from increased home values, have seen a decline in participation.
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It has also decreased for white non-Hispanics, whose salaries are, on average higher than those of other employees.
According to a paper that will be discussed at the Brookings Papers on Economic Activity (BPEA) conference on March 30, long COVID, fear of contracting COVID, and Americans’ shifting priorities for the balance between work and personal activities may account for more than half of the decline in the U.S. labour force participation over the past three years.
Where Are the Missing Employees, According to the Paper?
—labour force participation, which measures the proportion of persons employed or looking for work, fell by more than three percentage points during the first two months of the COVID-19 epidemic from 63.3% in January 2020, or a loss of more than 8.2 million people. The decline in participation immediately recovered by around half, and in the second half of 2021, it increased again.
According to the authors, the persistence of pre-pandemic demographic trends can be attributable to about 40% (or close to 1 million workers) of the steady drop. The Baby Boomers are quitting the job market as they approach retirement age. But as the population grows, more educated people are more likely to be employed at every age.
The authors go over four explanations for the remaining 60% of the decline (roughly 1.4 million workers), including cash payments to households in 2020 and 2021 that made it easier for some people to put off looking for a new job, COVID fear, symptoms from long-term COVID that make it difficult to work, and shifting preferences for work-life balance.
The authors conclude that the cash payments—generous unemployment benefits, economic impact payments, and an enlarged child tax credit—cannot fully explain the reduction in participation. By the beginning of 2022, all of these payments had ended. While they helped households’ balance sheets look better, they did not significantly increase household wealth or have a long-lasting impact on the proportion of people who choose to work.
The loss of involvement is somewhat explained by fear of contracting COVID. However, studies show that this worry has dramatically decreased. However, the average weekly hours of those still working have not returned to their pre-pandemic levels. (A Labor Department poll found that the three-month moving average fell from 37.5 hours in January 2020 to 36.9 hours in November 2022.)
“Fear of COVID cannot cause people to work fewer hours. If you were afraid of COVID, you just wouldn’t be going to work at all, Abraham remarked in an interview with The Brookings Institute.
“You have a greater opportunity to reevaluate your objectives if you have the financial resources.”
According to the authors, long COVID, which causes symptoms like extreme fatigue, shortness of breath, muscle weakness, and mental fog months after the initial infection, could account for 10% of the decline in hours and about half of the 1.4 million worker participation shortfall at the end of 2022.
According to the authors, “a reevaluation of the balance between work and other activities also may be part of the explanation.”
They contend that demographic inequalities in involvement are consistent with that final hypothesis. A more significant percentage of older persons, many homeowners who benefited from increased home values, have seen a decline in participation. It has also decreased for white non-Hispanics, whose salaries are, on average higher than those of other employees.
Abraham stated, “You have more leeway to reassess your objectives if you have the financial wherewithal. “You have less freedom if you have less money,”
CITATION
Lea Rendell, Katharine, and Abraham. 2023. “Which Employees Are Missing? Spring BPEA Conference Draft.
Disclosures
No company or anyone provided financial support to the authors for this paper, nor did any company or individual have an economic or political stake in it. A current company officer, director, or board member with a financial or political stake in this article is not one of the authors.
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