Why have so many workers left the labor force?:
Where have all the workers gone?, by: Isabel V. Sawhill, Brookings: Employment rates among prime-age workers, especially men, have declined sharply over the last few decades. The Great Recession made matters worse. Recent declines in the unemployment rate have enticed some back into the active labor force but the long-term picture is still discouraging. When we compare the U.S. to other advanced countries, working-age adults are simply not working as much as adults in most European nations.
What's going on here? As my colleague Gary Burtless notes, three developments have probably played a role. First, real wages have fallen by 28 percent for high-school educated men since 1980, making work much less attractive, but also signaling that employers are looking for a higher level of skill. Second, the disability rolls have been growing (primarily because of musculoskeletal and mental health issues). Although getting onto disability is a long and involved process, the benefits compete favorably with what a low-skilled worker could earn and create a disincentive to re-enter the labor market. Third, now that women are almost half the labor force, the pressure for men to work has lessened.
In the shorter run, it's hard to tell how much of the recent sharp drop in employment is related to weak demand and how much to these longer-term factors. ....