Fox & Friends used the May jobs report to indict unemployment and disability benefits, claiming that they encourage poor job search behavior that keeps the labor force participation rate low. In fact, unemployment and disability benefits do not pull people out of the workforce, and low labor force participation is the result of unrelated demographic changes.
Fox & Friends Claims That Government Benefits Hurt Labor Force Participation Rate
Fox Business Correspondent Nicole Petallides: Because Of Government Benefits, Some People Won't “Even Get Up Off The Couch.” On the June 7 edition of Fox & Friends, Fox Business correspondent Nicole Petallides argued that that the labor participation rate “still stinks,” and attributed lack of participation in part to government benefits:
PETALLIDES: I put my notes, 63.3% is what it was, so you're telling me it went to 63.4%. Do you see this? Lowest since 1979. Still stinks. 1979 I was at Buckley Country Day School learning the national anthem. It still shows you that people are not participating, they are tired, they're either maybe taking jobs that are beneath them or a part-time job, or dropping out of the force altogether. And to your point, Brian, you talked about people getting benefits, and that's what we learned from the University of Chicago, and they just said that sometimes, people don't even look because they're getting all these benefits. Insurance, food stamps, which are up 39% since 2009, and the last one was disability benefits, and that's up about 13%. So, you know, for some, it's 'why should I even get up off the couch, I'm getting all these good benefits.' [Fox News, Fox & Friends, 6/7/13]
In Fact, Fewer People Are Receiving Unemployment Benefits
Labor Department Finds That Number Of U.S. Workers Receiving Benefits Is Trending Down. Contrary to Petallides' suggestion that more Americans are receiving benefits across the board, The Wall Street Journal reported that “the number of U.S. workers receiving unemployment benefits has trended down to levels last seen in the early days of the recession”:
The number of U.S. workers receiving unemployment benefits has trended down to levels last seen in the early days of the recession -- a signal that the jobless rate is poised to fall in the coming months.
In the week ended May 25, the number of workers seeking another week of aid in regular state programs fell by 52,000, according to the Labor Department. That pushed the four-week moving average of continuing claims down to a seasonally adjusted 2.98 million, the lowest level since May 2008.
A year ago, 3.3 million workers received those benefits.
The declining number of people receiving claims week after week could help push down the unemployment rate, which stood at 7.5% in April. [The Wall Street Journal, 6/6/13]
Unemployment And Disability Benefits Do Not Negatively Impact Labor Force Participation
Joint Economic Committee Report Finds That Unemployment Insurance Does Not Discourage Job Seeking. A report by the U.S. Congress Joint Economic Committee found that fears that unemployment insurance benefits dissuade unemployed workers from looking for work are unfounded:
The principal purpose of the unemployment insurance (UI) program is to provide workers with a safety net in the event that they lose their job. However, some worry that unemployment insurance benefits may inhibit unemployed workers from vigorously looking for or accepting a new job. Those fears are unfounded. The best evidence suggests that during this current economic downturn both the unemployment rate and duration of unemployment were minimally impacted by unemployment insurance benefits and the extensions of benefits. To the extent that the unemployment rate even rises, UI may be providing an enormous social benefit by preventing people not from taking jobs, but from dropping out of the labor force altogether (and often permanently), relying instead on more costly programs like disability benefits. [U.S. Congress Joint Economic Committee, July 2010]
Disability Benefits Do Not Pull People Out Of The Workforce. According to a Washington Post Wonkblog interview with Harold Pollack, an expert on disability policy at the University of Chicago's School of Social Service Administration, disability benefits are not “luring away people who could work”:
BRAD PLUMER (Washington Post's Wonkblog): Now there's another big concern that once workers qualify for disability, they leave the labor force altogether. They never work again. Is that a real worry? Is the disability program really luring away people who could work?
POLLACK: I don't think so. One way to see this is to look at the employment rates for people who applied for disability but were then denied. And those are actually quite low, below 50 percent. That suggests we're not pulling people out of the workforce who would otherwise be there.
It's also worth remembering that the adult benefits for disability are not that high. If people are leaving the labor market so that they can get $13,000 per year and health care because that's better than anything that employers can provide, what does that tell you about the state of the economy? [The Washington Post, 3/28/13]
Labor Force Participation Rate Product Of Demographic Shift, Not Government Benefits
Retirement Among Baby Boomers Contributing To Shrinking Labor Force. According to The Washington Post, many economists agree the shrinking labor force participation rate is largely explained by a demographic shift, wherein “baby boomers are starting to retire en masse”:
But a number of economists are arguing that the recession is distracting people from the real story -- long-run demographic trends that have nothing to do with the current economy. Baby boomers are starting to retire en masse, which means that there are fewer eligible American workers.
Demographics have always played a big role in the rise and fall of the labor force. Between 1960 and 2000, the labor force in the United States surged from 59 percent to a peak of 67.3 percent. That was largely due to the fact that more women were entering the labor force while improvements in health and information technology allowed Americans to work more years.
But since 2000, the labor force rate has been steadily declining as the baby-boom generation has been retiring. Because of this, the Federal Reserve Bank of Chicago expects the labor force participation rate to be lower in 2020 than it is today, regardless of how well the economy does.
In a March report titled “Dispelling an Urban Legend,” Dean Maki, an economist at Barclays Capital, found that demographics accounted for a majority of the drop in the participation rate since 2002. [The Washington Post, 5/4/12]