Economist warns of 'flight from work' crisis

A record 105.8 million Americans were outside the labor force in June, as workforce participation slipped to its lowest level in nearly four years, according to The Kobeissi Letter, which cited new data from the Federal Reserve Bank of St. Louis.

The June report showed 832,000 people left the labor force in a single month, pushing the total above levels seen during both the Great Recession and the COVID-19 pandemic. The category includes Americans age 16 and older who are neither working nor actively seeking employment, including retirees, students and others.

Labor economist Nicholas Eberstadt of the American Enterprise Institute said the figures point to a growing problem among working-age Americans, particularly men.

"We've got a big problem … with the flight from work of prime-age men. And what's been carrying the overall prime-age labor force participation has been the strong involvement of women, not men," Eberstadt, who holds the Henry Wendt Chair in Political Economy at the American Enterprise Institute, told the New York Post.

Federal data show about 5.3 million Americans are discouraged workers or have stopped looking for jobs altogether. Another 23.3 million receive long-term illness, disability or similar benefits, while retirees account for roughly half of all Americans outside the workforce.

The labor force participation rate fell to 59% in June, its lowest level since September 2021.

Eberstadt estimated there are about 7 million men between ages 25 and 54 who are no longer participating in the labor force and added that the trend extends to women.

"There are about 3.5 million women who are kind of like the doppelgangers to this," he said. "There's a growing group of dropout women who are neither working nor looking for work, have no children under the same roof with them, and no husband present."

Eberstadt said aging alone does not explain the decline, noting that labor force participation has risen in aging societies such as Europe and Japan.

"These are the healthiest, best educated Americans that have ever lived on the planet," he said.

The nation's fragmented disability benefit system has become a major blind spot, Eberstadt argued.

"The extent and the sprawl of participation or dependence upon different disability programs is a blind spot," he said. "There's no office in Washington, DC ... that can tell you how many Americans are receiving benefits from which disability programs."

Eberstadt also expressed skepticism about proposals for a universal basic income as artificial intelligence reshapes the labor market, arguing that paying people regardless of whether they work could further reduce workforce participation.

"I look at how men who are neither working nor looking for work say that they are spending their days now,” he said. "And it is very depressing to see what they say they are doing."

Eberstadt said expanding income support without encouraging employment risks deepening social isolation among able-bodied adults who have already disengaged from the workforce.

"They are not engaged in civil society, not helping out around the house, not getting out of the house. Spending 2,000 hours a year in front of a screen. That's a great warm-up act for becoming a statistic in deaths of despair," he said.