[Joint House and Senate Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 114-106

                  WHAT LOWER LABOR FORCE PARTICIPATION
                 RATES TELL US ABOUT WORK OPPORTUNITIES
                             AND INCENTIVES

=======================================================================

                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 15, 2015

                               __________

          Printed for the use of the Joint Economic Committee



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                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

SENATE                               HOUSE OF REPRESENTATIVES
Daniel Coats, Indiana, Chairman      Kevin Brady, Texas, Vice Chairman
Mike Lee, Utah                       Justin Amash, Michigan
Tom Cotton, Arkansas                 Erik Paulsen, Minnesota
Ben Sasse, Nebraska                  Richard L. Hanna, New York
Ted Cruz, Texas                      David Schweikert, Arizona
Bill Cassidy, M.D., Louisiana        Glenn Grothman, Wisconsin
Amy Klobuchar, Minnesota             Carolyn B. Maloney, New York, 
Robert P. Casey, Jr., Pennsylvania       Ranking
Martin Heinrich, New Mexico          John Delaney, Maryland
Gary C. Peters, Michigan             Alma S. Adams, Ph.D., North 
                                         Carolina
                                     Donald S. Beyer, Jr., Virginia

                  Viraj M. Mirani, Executive Director
                 Harry Gural, Democratic Staff Director
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                            C O N T E N T S

                              ----------                              

                     Opening Statements of Members

Hon. Daniel Coats, Chairman, a U.S. Senator from Indiana.........     1
Hon. Carolyn B. Maloney, Ranking Member, a U.S. Representative 
  from New York..................................................     9
Hon. Kevin Brady, Vice Chairman, a U.S. Representative from Texas    10

                               Witnesses

Dr. Scott Winship, Manhattan Institute For Policy Research, New 
  York, NY.......................................................     3
Dr. Aparna Mathur, Resident Scholar and Jacobs Associate, 
  American Enterprise Institute, Washington, DC..................     5
Dr. Elisabeth Jacobs, Senior Director for Policy and Academic 
  Programs, Washington Center for Equitable Growth, Washington, 
  DC.............................................................     7

                       Submissions for the Record

Prepared statement of Hon. Daniel Coats..........................    32
Prepared statement of Hon. Carolyn B. Maloney....................    33
    Chart titled ``Longest Streak of Private-Sector Job Growth 
      Continues''................................................    36
    Chart titled ``Unemployment and Underemployment Rates Have 
      Declined Significantly from Recession Peak''...............    37
    Chart titled ``Labor Force Participation Rates by Gender''...    38
    Chart titled ``Labor Force Participation Rate and Share of 
      Adult Population in Prime Working Years (Ages 25-54)''.....    39
    Chart titled ``Share of Young People Going to College''......    40
    Chart titled ``Current Labor Force Participation Rates by 
      Age''......................................................    41
    Chart titled ``Labor Force Participation Rates of Young 
      People by Race''...........................................    42
    Chart titled ``Aging Trends Explain Half of Decline in Labor 
      Force Participation Rate''.................................    43
Dr. Scott Winship, Manhattan Institute For Policy Research, New 
  York, NY.......................................................    44
Dr. Aparna Mathur, Resident Scholar and Jacobs Associate, 
  American Enterprise Institute, Washington, DC..................    55
Dr. Elisabeth Jacobs, Senior Director for Policy and Academic 
  Programs, Washington Center for Equitable Growth, Washington, 
  DC.............................................................    77
Questions for the Record for Dr. Winship and Responses submitted 
  by Representative Beyer........................................    89
Questions for the Record for Dr. Winship, Dr. Mathur, and Dr. 
  Jacobs and Responses submitted by Representative Maloney.......    92
Questions for the Record for Dr. Mathur and Dr. Jacobs and 
  Responses submitted by Senator Klobuchar.......................   106

 
                         WHAT LOWER LABOR FORCE
                      PARTICIPATION RATES TELL US
                        ABOUT WORK OPPORTUNITIES
                             AND INCENTIVES

                              ----------                              


                        WEDNESDAY, JULY 15, 2015

             Congress of the United States,
                          Joint Economic Committee,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:30 p.m. in Room 
562 of the Dirksen Senate Office Building, the Honorable Daniel 
Coats, Chairman, presiding.
    Representatives present: Brady, Paulsen, Hanna, Schweikert, 
Grothman, Maloney, Delaney, Adams.
    Senators present: Coats, Lee, Cassidy, Peters, Sasse.
    Staff present: Barry Dexter, Cary Elliott, Connie Foster, 
Harry Gural, Colleen Healy, Karin Hope, Jason Kanter, Christina 
King, Kristine Michalson, Viraj Mirani, Thomas Nicholas, Robert 
O'Quinn, Brian Phillips, Aaron Smith, Phoebe Wong.

   OPENING STATEMENT OF HON. DANIEL COATS, CHAIRMAN, A U.S. 
                      SENATOR FROM INDIANA

    Chairman Coats. I'll call this hearing to order. Here we 
are in a somewhat unique situation. The Senate will be 
beginning a long series of votes at about 3:15, which means 
that close to 3:30 we will have to adjourn and not be able to 
come back because these votes will last for about a two-hour 
period of time.
    The House is in a very similar situation, different 
procedurally, but they only also have about an hour. So we are 
going to have to expedite the process here.
    We have three very good witnesses that we want to hear 
from. Our members may be in short supply, which will give each 
of us more time to interact with our witnesses. My pastor says 
that the more efficient and less time he puts into the sermon, 
the more people want to come to church.
    [Laughter.]
    And the more they leave with, rather than a long sermon. So 
let me welcome our witnesses and thank them for being here 
today to discuss the decline in the labor force participation 
rate, the underlying reasons for it, and for what it means for 
American workers.
    We have seen a steady decline in the labor force 
participation rate since the early 2000s. June's employment 
numbers reveal another drop in labor force participation to 
62.6 percent, a record low for the post-recession period and 
the lowest we have seen since the late 1970s.
    Today's hearing will explore the questions of why the 
proportion of Americans looking for work has fallen, what does 
this mean for our country and these Americans and their 
wellbeing, and how much of this is due to the economy, how much 
is due to demographics, social and cultural trends, and to 
policies that reduce the reward of working.
    The discussion will center on the notable decline in 
workforce participation, including how the long-term and short-
term trends factor into the issue; who is working less; where 
workforce trends are expected to go from here; and what that 
means for Americans' wellbeing and future growth.
    The combination of longer- and shorter-term trends in the 
midst of an uncharacteristically slow recovery has made it 
difficult to determine the expectations for future economic 
growth and workforce participation.
    And that is why we are spending time here today, asking 
these questions in hopes of shedding light on this topic. While 
many believe that America has entered a, quote, ``new normal'' 
characterized by lower economic growth and workforce 
participation, and subsequently require policies that lessen 
the negative consequences, is it too soon to claim that these 
trends are a permanent feature of the American economy?
    Our witnesses, we hope, will shed some light on all of 
this. As we know, we are not growing at a rate in terms of our 
GDP growth that is allowing Americans more opportunities to 
participate in a dynamic, growing economy. And so I think the 
wisdom that can be brought to us by our witnesses today in the 
questioning that will take place is appropriate.
    With that, I am going to turn to our witnesses.
    Dr. Scott Winship is the Walter B. Wriston Fellow at the 
Manhattan Institute for Policy Research, previously a fellow at 
the Brookings Institution, a research manager of economic 
mobility projects of the Pew Charitable Trust, and a senior 
policy advisor at Third Way.
    Dr. Winship, thank you for joining us.
    Dr. Mathur is a Resident Scholar and Jacobs Associate in 
Economic Policy Studies at the American Enterprise Institute. 
She has been a consultant at the World Bank and an Adjunct 
Professor at Georgetown University School of Public Policy and 
Economics; a professor at the University of Maryland. Thank 
you, Doctor.
    And finally, Dr. Jacobs, Elisabeth Jacobs, Senior Director 
for Policy and Academic Programs at the Washington Center for 
Equitable Growth. Before that, she was a Fellow in Governance 
Studies at the Brookings Institution. Dr. Jacobs has also 
previously served as Senior Policy Advisor here at the Joint 
Economic Committee--welcome back. And, as an Advisor to the 
Senate Committee on Health, Education, Labor, and Pensions.
    I welcome all three of you. And, Dr. Winship, we will start 
with your remarks. If you can condense those to about five 
minutes, that will leave us more time for questions.
    [The prepared statement of Chairman Coats appears in the 
Submissions for the Record on page 32.]

   STATEMENT OF DR. SCOTT WINSHIP, WALTER B. WRISTON FELLOW, 
     MANHATTAN INSTITUTE FOR POLICY RESEARCH, NEW YORK, NY

    Dr. Winship. Thank you, Mr. Chairman.
    Chairman Coats, Ranking Member Maloney, and Members of the 
Committee:
    Thank you for the opportunity to testify before the Joint 
Economic Committee today. Policy cannot succeed but 
accidentally if we do not have a clear understanding of the 
problems that face us.
    It is my belief that much of what we think we know about 
labor force participation and the state of the job market is 
incorrect, based on a mistaken read of the available data.
    In my past research I have examined trends in the labor 
force participation of men between the ages of 25 and 54. A 
strong majority of men in this age range who are out of the 
labor force, roughly 70 percent on the eve of the Great 
Recession, tell government surveyors when asked outright that 
they do not want a job.
    The increase in their numbers between 1979 and 2006 
explains nearly the entire decline in their labor force 
participation over that period.
    Furthermore, roughly half of men in this age range and out 
of the labor force cite a disability when asked the reason for 
not working or looking for work.
    The increase in their ranks explains about one-third of the 
decline of labor force participation. Most data on health 
indicators offer little reason to think that disabilities are 
becoming more common. But receipt of federal disability 
benefits has increased significantly since the 1980s.
    Federal disability benefits increasingly serve as a shadow 
long-term unemployment program for able-bodied men who struggle 
to find work.
    Today I will focus my remarks on the labor force 
participation of black and white men and women under age 25.
    Figure 1 displays trends for these groups over the past 52 
years. A number of apparently worrisome features are evident.
    The labor force participation of all four groups has been 
declining for 16 years or more, much more for men, and much, 
much more for black men in particular.
    The participation rate of young black men has fallen fairly 
consistently since at least 1962, while the rate for non-
Hispanic white men has ``only'' fallen for the past 33 years. 
Sizeable participation gaps between blacks and whites remain.
    As I discuss in my written testimony, labor force 
participation can decline for good reasons, and increase for 
bad ones.
    In particular, taking into account rising school enrollment 
among young adults goes some ways toward explaining the 
``problems'' shown in Figure 1. African American enrollment 
rates have risen steadily over these 52 years, while white 
rates began rising in the mid-1980s.
    All four groups are equally likely today to be out of the 
labor force but in school. The labor force participation rate 
for white men in the 1960s was artificially low due to the 
inflated school enrollment inspired by the Vietnam draft, and 
to a lesser extent benefits from the GI bill.
    With the end of the draft, many fewer white men enrolled in 
school. As a result, their labor force participation rose, 
opening up a gap compared with black men among whom school 
enrollment continued to increase.
    To illustrate the impact of taking school enrollment 
patterns into account, the next chart shows the percent of 
young adults in the labor force or in school. The number of 
young adults we might worry are idle shrinks considerably 
versus in Figure 1.
    For instance, 43 percent of young black men were out of the 
labor force last year, but just 15 percent were out of the 
labor force and not in school. The declines in male labor force 
participation are much smaller after taking school enrollment 
into account, and the female declines disappear altogether.
    The American jobs machine is not fundamentally broken. A 
war on robots is premature, and always will be. The remaining 
features of this chart to be explained also illustrate the 
importance of opportunity and work incentives.
    The chart shows a dramatic increase in labor force 
participation among black women between 1993 and 1997, a period 
during which unprecedented state and federal welfare reforms 
were implemented.
    Because the African American poverty rate and rate of 
single parenthood are significantly higher than the rates for 
whites, reforms to the safety net disproportionately affect 
them.
    Once receipt of federal means-tested cash assistance is 
taken into account, the historic and recent labor force 
participation gaps between black and white women disappear 
entirely. The implication is that work promoting safety net 
reforms can successfully increase labor force participation and 
consequently as other research on the 1990s reforms has shown 
reduce poverty.
    As for young men among those out of the labor force, the 
share indicating to federal surveyors that they want a job has 
declined since the early 1980s.
    Taking that into account, the share of young men out of the 
labor force not in school and who would like to work has been 
low and stable since at least the mid-1970s.
    Because the decline in wanting a job was larger among black 
men, the black/white labor force participation gap largely 
vanishes after we account for this factor. Whether or not it is 
a problem that a rising share of men do not want a job depends 
on the reasons for this increase.
    Certainly the increasing number of men receiving federal 
disability benefits bears scrutiny and offers another way for 
policy to encourage opportunity-promoting initiatives.
    Thank you.
    [The prepared statement of Dr. Winship appears in the 
Submissions for the Record on page 44.]
    Chairman Coats. Thank you.
    Dr. Mathur.

  STATEMENT OF DR. APARNA MATHUR, RESIDENT SCHOLAR AND JACOBS 
    ASSOCIATE, AMERICAN ENTERPRISE INSTITUTE, WASHINGTON, DC

    Dr. Mathur. Chairman Coats, Ranking Member Maloney, and 
Members of the Committee:
    It is an honor to testify before the Committee on the 
important topic of labor force participation, work incentives, 
and opportunity.
    The Great Recession has been severe on many measures, but 
particularly in its impact on the labor market. The most recent 
jobs report showed healthy job gains and an unemployment rate 
of 5.3 percent.
    However, there are many worrying indicators. Today there 
are nearly 6.5 million persons employed part-time involuntarily 
because they could not find a full-time job.
    Another 1.9 million individuals want a job but have not 
searched for work in the previous few months, perhaps because 
they are too discouraged to look. Over 2 million workers have 
been jobless for 27 weeks or more.
    The labor force participation rate in the U.S. is at 
historic lows. In June 2015, nearly 6 years after the official 
end of the Great Recession, the labor force participation rate 
is at 62.6 percent, a rate not seen since 1978.
    This is troubling particularly because participation is 
declining not just among retiring baby boomers but also among 
people at prime working ages and youth.
    Some studies suggest that falling labor force participation 
rates among prime age males can be explained by a lack of 
demand for middle-skill workers, perhaps because these jobs are 
more susceptible to automation and to offshoring.
    Data show that over the recession middle-skill jobs 
experienced a sharper and more long-lasting employment decline 
than high- or low-skill jobs. Moreover, middle-skill workers 
with low levels of education typically leave unemployment to 
exit the labor market rather than to find low-skill or high-
skill jobs.
    Job mobility also declined significantly during the Great 
Recession. Workers were unable to move from poor-quality jobs 
to good-quality jobs as easily during the Recession as they 
would have been able to do during normal times.
    On average, job quality and job finding rates went down 
significantly over the Recession. Due to the slack in the labor 
market, average wage growth has been very weak, putting 
additional strain on low- to middle-income households.
    How do we address these challenges?
    First out, it is important to remember that outcomes are 
highly influenced by early investments in human capital and 
skill development.
    For instance, as per a recent study, moving to better 
neighborhoods at young ages could improve college attendance 
rates and lifetime earnings. Experimenting with solutions that 
allow low-income families to move from high poverty to low 
poverty areas could help improve long-term economic mobility.
    Differences in family structure also influence early 
investments in human capital. Families headed by single mothers 
are more likely to live in poverty than married parent 
households.
    As a result, children in these families have access to far 
fewer opportunities and are disadvantaged when it comes to 
school readiness. To improve outcomes for these families, we 
should consider expanding the earned income tax credit.
    This helps to encourage labor force participation for 
single mothers and boosts family incomes, which is helpful for 
children as well.
    For youth graduating into a bad labor market with little 
prospects of finding a job and burdened with high levels of 
student debt, I propose expanding the system of paid 
apprenticeship programs that would be available to them before 
they graduate so that they can build up a set of skills that 
they would in fact need on the job.
    Funds could be provided in incentives such as tax credits 
to make them participate in these programs which are clearly 
beneficial to both sides of the market. To improve labor force 
participation for women, we need to consider ways to provide 
paid maternity leave so that women retain the attachment to the 
work force even after giving birth to a child.
    I have proposed using the existing system of child-related 
tax credits to fund maternity leave. This involves allowing for 
advance payments on the EITC, the Child Tax Credit, and the 
Dependent Care Credit, and making the Dependent Care Credit 
refundable.
    Differences in state occupational licensing requirements 
can make it difficult for entrepreneurs and workers to find 
opportunities and jobs. The fraction of workers required to 
hold a government-issued license rose from less than 5 percent 
in the 1950s to 38 percent in 2008.
    This in turn has led to higher training costs which has 
affected the mobility of workers across jobs. Mutual 
recognition of other states' licenses would improve worker 
mobility.
    We can also reform the use of Unemployment Insurance funds, 
particularly the self-employment assistance program, to help 
startups by the unemployed.
    A program in France that allowed unemployed individuals who 
started their own businesses to keep access to unemployment 
insurance for three years in case the business venture failed 
was a success.
    There are some policies that should be beneficial to 
workers in principle but which research shows often have 
unintended negative effects on workers.
    For instance, work by Casey Mulligan finds that subsidies 
provided to workers under the Affordable Care Act in households 
with incomes near 100 to 400 percent of poverty create work 
disincentives.
    Recent increases in minimum wages and the proposal to 
change overtime rules can also hurt employment and hours worked 
for low-skilled workers.
    According to a recent Pew Report, many American families 
are feeling financial strain and are still pessimistic about 
future earnings. In order to improve opportunity and mobility, 
we need to address the labor market challenges facing the U.S. 
economy today, perhaps through some combination of policies 
discussed in my longer testimony. Thank you.
    [The prepared statement of Dr. Mathur appears in the 
Submissions for the Record on page 55.]
    Chairman Coats. Dr. Mathur, thank you very much.
    And now, Dr. Jacobs. Thank you, Dr. Jacobs.

 STATEMENT OF DR. ELISABETH JACOBS, SENIOR DIRECTOR FOR POLICY 
AND ACADEMIC PROGRAMS, WASHINGTON CENTER FOR EQUITABLE GROWTH, 
                         WASHINGTON, DC

    Dr. Jacobs. Thank you. Thank you, Chairman Coats, Ranking 
Member Maloney, and the rest of the Committee for inviting me 
to testify today.
    My name is Elisabeth Jacobs. I am Senior Director for 
Policy and Academic Programs at the Washington Center for 
Equitable Growth. The Center is focused on understanding what 
grows our economy, with an emphasis on whether and how high and 
rising levels of economic inequality impact growth.
    It is an honor to be here today to discuss the health of 
the labor market. My testimony highlights the importance of 
looking not only at the short-term but also at long-run trends. 
Doing so is critical for diagnosing the problem and for 
identifying the most appropriate policy solutions.
    There are five main conclusions from my testimony that I 
want to leave you with today.
    First, the labor market is recovering.
    Second, looking solely to the unemployment rate overstates 
that recovery.
    Third, the decline in the labor force participation rate 
predates the Recession and is primarily the result of 
demographic factors.
    Fourth, the share of the recent decrease in labor force 
participation that is not explained by demographics is mainly 
due to continued slack demand.
    Fifth, policy can play an important role, drawing workers 
into the labor force and therefore boosting labor force 
participation. But it is important to pull the right policy 
levers.
    The labor market is in the midst of the longest streak of 
private-sector job creation on record and has added 12.8 
million private-sector jobs over the last 64 months.
    Unemployment stands at 5.3 percent, the lowest rate in 7 
years. Despite this considerable progress, however, the labor 
market remains troubled. Relying solely on the unemployment 
rate as a sign of labor market health masks underlying 
problems, many of which have persisted for decades. Five years 
into the recovery from the most severe recession in recent 
history, demand remains slack. The employment-to-population 
ratio has fallen significantly during the recovery and stood at 
59.3 percent in June, but it remains 3.4 points below its pre-
recession peak.
    The difference between the trends in unemployment and 
employment is explained by the falling labor force 
participation rate. This decline predates the recession. The 
overall labor force participation rate has been declining since 
2000, and stood at 62.6 percent in June.
    The long-term trend is mainly the result of several 
structural changes, including the aging of the workforce. As 
older members of the baby boom generation retired, the labor 
force participation rate ticked down. We should expect this 
downward pressure to continue.
    At the same time, a growing number of young workers 
temporarily left the labor force to pursue education. 
Retirement and increased educational attainment are generally 
positive reasons for a drop in labor force participation.
    While participation was trending downward long before the 
Great Recession, the economic crisis accelerated that decline. 
Exactly how much of a decrease since December 2007 is due to 
these long-term structural changes and how much is due to the 
exceptionally deep Recession is still up for debate, but the 
accelerated fall in labor force participation is certainly due 
to some combination of these factors.
    Policy can play an important role in boosting labor force 
participation by focusing on the correct levers. Persistent 
slack demand suggests that fiscal and monetary policies are 
important first steps. On the supply side, the failure to adapt 
policy to meet the demands of modern American families means 
that women's labor force participation has stalled.
    In 1990, the United States was a global leader in women's 
labor force participation, ranking sixth out of 22 high-income 
countries. By 2010, we had fallen to 17th. Research suggests 
that nearly one-third of that decline is explained by the 
absence of family-friendly policies. Paid leave, flexible 
scheduling, affordable high-quality child care, and universal 
pre-K are all policies that could play a major role in jump-
starting the engine of women's labor force participation.
    A second policy option to improve participation is a 
criminal justice reform agenda that includes a reduction in the 
incarceration rate, and policies to curb discriminatory 
employment practices against those with criminal records.
    Research shows that criminal backgrounds can be significant 
barriers to employment. Removing some of this stigma could have 
beneficial impacts for many who are currently discouraged from 
work. To conclude, long-run trends will continue to push the 
labor force participation rate downward, but smart policy can 
provide counter-pressure. As long as policy makers are aware of 
the demographic headwinds and pursue policy options that fit 
the problem, they can take steps to move our economy toward 
full employment. Thank you.
    [The prepared statement of Dr. Jacobs appears in the 
Submissions for the Record on page 77.]
    Chairman Coats. Well thank you, Doctor, and thank the 
witnesses for your testimony.
    To my colleagues who have just joined us here, I announced 
early on the reason we started right at 2:30 is that both the 
House and the Senate has kind of a drop-dead time here of 
around 3:15 or 3:30. So we are trying to shoehorn in a very 
substantive range of issues into a small amount of time. So we 
are trying to abbreviate and move forward as quickly as 
possible.
    I do want to recognize the Ranking Member, Congresswoman 
Maloney, and our Vice Chairman, Mr. Brady, for our hopefully 
truncated opening statements. And then we will try to move 
through the Members as quickly as we can.
    I will shorten my question time down to one question, but 
if we could get to essential question or issue for each member 
hopefully we can give everybody an opportunity to raise a point 
or to raise a question for our witnesses to respond to.
    So we will do the best that we can. We have a series of 
votes that is going to take up to two hours, and so there is no 
way we can get back on the Senate side, and I think the House 
has the same kind of dilemma.
    So with that, let me recognize the Ranking Member for her 
opening statement.

OPENING STATEMENT OF HON. CAROLYN B. MALONEY, RANKING MEMBER, A 
               U.S. REPRESENTATIVE FROM NEW YORK

    Representative Maloney. Okay, thank you very much, Chairman 
Coats, for calling the hearing. There seems to be a broad 
consensus these days that the economy is stronger than it has 
been in years. The evidence is undeniable that the labor market 
is on a much stronger footing.
    As you can see in this chart, we have had a record 64 
straight months of private-sector job growth with businesses 
creating 12.8 million jobs during this time, and under the 
leadership of President Obama the unemployment rate is 5.3 
percent, close to current estimates of what economists call its 
``natural rate.''
    There has also been substantial improvement in the broadest 
measure of unemployment, the U-6 rate, which includes 
discouraged workers not in the labor force, as well as those 
working part time who would like full-time work.
    And as you can see in this chart, the economy has come a 
long way. Just remember how far we have come. When President 
Obama took office, our economy was in a dire situation. We were 
shedding roughly 800,000 jobs a month. But bold action by the 
President helped put our Nation back on track.
    And I would like to say that many Republicans are acting as 
if the declining rate of labor force participation is some kind 
of new phenomenon. I note that many of them opposed the 
measures that have helped reverse the economic free fall. They 
predicted dire consequences, but these predictions have been 
proven wrong.
    Now they are left with the weak claim that good job numbers 
are not really good job numbers. And that brings us to today's 
hearing. While it is true that economists are concerned about 
the declining labor force participation rate, much of this 
decline is structural and it long predates the Obama 
Administration.
    Some of my colleagues act like this is a new phenomenon. 
They gloss over the fact that the labor force participation 
rate fell over the course of George Bush's Administration, and 
they ignore that the labor force participation rate for men has 
been falling since the early 1950s, as you can see in this 
particular chart.
    Economists have long anticipated the recent decline in the 
labor force participation rate, and they predict that it will 
continue over at least the next 10 years. This chart shows the 
rise and fall in the percentage of Americans in their prime 
working years. And I have just a brilliant statement but I am 
going to put the rest of it in the record in the interest of 
time.
    So thank you.
    [The prepared statement of Representative Maloney appears 
in the Submissions for the Record on page 33.]
    Chairman Coats. Thank you, Congresswoman Maloney.
    Congressman Brady.

 OPENING STATEMENT OF HON. KEVIN BRADY, VICE CHAIRMAN, A U.S. 
                   REPRESENTATIVE FROM TEXAS

    Vice Chairman Brady. Well in the interest of time, I will 
submit my record as well. Just to make one 30-second point. You 
know, if 5.3 percent was a true indicator of the economy, we 
would not be holding this hearing.
    The fact of the matter is, the number of adults in the 
workforce right now compared to the population has been stalled 
out about the same as it was nearly six, seven years ago. The 
labor participation rate, people coming back to the workforce, 
is growing if you are over 60, shrinking if you are under 60. 
Not a healthy sign.
    This recovery is the most disappointing recovery in half a 
century. We are missing 5 million jobs, more than that, in the 
economy. We are missing GDP about the size of Canada that ought 
to be back in the U.S. GDP today. And so, no, we are not 
holding a parade for the economy because it has a long way to 
go.
    We have been stuck in second gear for way too long. We 
think we can do better. And the purpose of this hearing, Mr. 
Chairman, I appreciate you holding it, is we think we can do 
much better for the people still looking for full-time work in 
America. So, thank you.
    Chairman Coats. Thank you. I am going to ask just one 
question, too, and ask for hopefully a brief response from our 
three witnesses here, and then move down the line here in terms 
of participation of our members.
    The question is this: Are we facing the remaining temporary 
effects of this painfully slow recovery?
    You know, a study was done that is very, very accurate of 
the recoveries from recessions all the way back to World War 
II. We are half the rate of the recovery of every other 
recession that this country has had for the last 50 years.
    And so that really raises the question that a lot of people 
have said, well, this is the new normal. I mean, technology 
changes, robotics, aging workforce and so forth, that's the 
reason for this. Others are saying, no, it is policy-induced. 
We have not put the policies in place to have dynamic growth 
within the economy and the GDP. And if we do not get that, we 
are going to continue to suffer through this.
    And now we are into seven years of this. So regardless of 
how many people have come back to work, the precipitous loss of 
jobs following 2008-2009, the collapse here, and the continued 
slow recovery has put a lot of people out of work.
    So just your thoughts on that and response to that. Is this 
something we are just going to have to accept going forward 
because of all the changes that have been mentioned? Or is it 
more policy driven and Congress, working together with the 
Administration, adapting new policies can put us back on a fast 
track?
    Let's go down the line, Dr. Winship, starting with you, and 
then the three of you respond briefly to that.
    Dr. Winship. Thank you, Mr. Chairman. I think that is an 
important question, and I do think the research is pretty clear 
that the last three recoveries we have had have been, I think 
jobless recovery is too strong a word, but certainly the pace 
of recovery has been a lot slower than it used to be.
    I think the latest research that I find the most persuasive 
on this point actually points to decreased dynamism in the 
United States economy--fewer startups, less entrepreneurship--
as being a real correlate of the worrisome trends in jobless 
recoveries.
    So in that sense, I think there are things that policy 
could do and the policy has contributed in some sense to the 
slowdown. I worry in particular about tax and regulatory policy 
that has the effect of protecting incumbent firms and making it 
more difficult for competitors to enter into markets.
    I think if we could remove some of those barriers, we could 
increase the number of startups and that that would actually 
have an impact on recoveries moving forward.
    Chairman Coats. Thank you.
    Dr. Mathur.
    Dr. Mathur. Yes. I do think that this recession has been 
different from other recessions. We have seen a much more 
significant increase in the share of workers who have taken 
part-time jobs involuntarily because they have lost hope of 
finding a full-time job and they are making do as well as 
possible.
    There has been a tremendous increase in the long-term 
unemployed and the prospects for them getting back into the 
labor market are, you know, dim, given the research that shows 
that employers are more reluctant to hire people who have been 
out of the workforce for that long.
    I do think a lot of it can be--the fact that people are 
taking these part-time jobs I think suggests that people are 
waiting for the recovery to happen, and they haven't just given 
up. And this is not a long-term structural thing in the sense 
that they do wish that there were policies for growth that 
would get them those full-time jobs. So I haven't given up on 
those people. And I think if we had the right policies, as I 
talk about in my testimony, you know, some of the regulations 
that we're seeing now with the Affordable Care Act, the work 
disincentives that exist in there, the minimum wage rules that 
are being adopted across different states, the new overtime 
rule provisions, I think all of them are pushing us more 
towards an economy where maybe employers are more reluctant to 
hire workers full-time.
    And so I think if we saw changes on those policies, and 
particularly with occupational licensing, if we saw changes in 
policies, I think we can see the economic growth and the labor 
market recovery that we would like to see.
    Chairman Coats. Thank you.
    And, Dr. Jacobs.
    Dr. Jacobs. Thank you. I think this is a critically 
important question, and I will give you two parts to my answer.
    On the one hand, we know that this recession is not like 
any other recession. The crisis was unlike any crisis that we 
have seen in the last 50 years.
    Ben Bernanke called the financial crisis worse than the 
crisis that preceded the Great Depression. And so I think 
comparing the speed of this recovery to recoveries over the 
last half century is actually a little bit of an apples to 
oranges comparison.
    That being said, I think it is unsurprising that we still 
do see evidence of slack demand. We do still see evidence that 
there is work left to be done.
    The vast majority of the growth in this recovery has been 
in full-time jobs, just as a side point to Dr. Mathur's point, 
but we know there has been slow employment growth across 
industries, and we know that there are things that we could do 
to actually speed up the recovery if we wanted to.
    For example, there are fiscal policies, including 
infrastructure spending, that we know would boost growth by 
about 1.5 percent. In the short term it would stimulate demand, 
and in turn over time you could really see that move the needle 
on labor force participation.
    So that is the short-term answer in terms of what we see in 
this recovery.
    At the same time, I think that it makes good sense to think 
about the longer term trends. Over the period that you framed 
in your question, over the last half century, we have seen 
economic inequality rise substantially. And that rise in 
inequality has been correlated to slower labor market 
recoveries than we would like to have seen. So I think we need 
to think about policy solutions that make sense in this 
context, and we need to also think about where the gains from 
growth are going in good times--largely to those at the very 
top. We need to really think critically about the policies that 
we could put in place that would do something about that.
    Chairman Coats. Thank you.
    Congresswoman Maloney.
    Representative Maloney. Thank you so much. I would just 
like to point out that by virtually every measure of labor 
market health, the economy is better off now than when 
President Obama took office. We were shedding 800,000 jobs a 
month. We have had 64 months of job growth, with 12.8 million 
new jobs, private-sector jobs. And the unemployment rate is at 
5.3 percent, down from the peak of 10 percent.
    So I would like to ask Dr. Winship, you mentioned in the 
first paragraph of your written testimony, and I quote, ``Our 
misinterpretation of the data more often than not, translates 
into an exaggeration of the economic challenges we face.'' End 
quote. And I agree with you.
    And in order to make good economic policy decisions, we 
need to be sure we have good and accurate data, and we need to 
be sure we are interpreting this data correctly. And we are 
here to talk about labor force participation rates.
    So first let's talk about demographics and the impact that 
it has on labor force participation. Approximately how much of 
the decline in the overall labor force participation rate over 
the past several years is due to demographics and the fact that 
the baby boomers are retiring, that they are leaving the 
workforce? What is the percentage that you believe is due to 
retirement and movement out of the workforce by the baby 
boomers?
    Dr. Winship. Thank you, Chairwoman. I would hesitate to put 
a percentage on it, but I think it is----
    Representative Maloney. So would you say ``a lot'' or ``a 
little''?
    Dr. Winship. I would say ``a lot.''
    Representative Maloney. A lot.
    Dr. Winship. And I think over the course of the recovery, 
and even before the recovery, I definitely have been on the 
record trying to convince more people that month after month 
when the new employment figures come out, and labor force 
participation is down, that we need to relax a little bit. And 
it is going to continue to decline just because the baby 
boomers are retiring.
    Representative Maloney. And let's talk about a positive 
factor that is in our economy now, and that is education. So 
many young people are pursuing higher education, and that is a 
good thing. It is good for them. It is good for our economy. 
And it builds their skills and they are doing it more than 
previous generations.
    And so how much of an effect do you think that that is 
having on the labor participation rate, would you say?
    Dr. Winship. I think it is significant, especially for the 
18- to 24-year-olds that I am talking about. You know, there is 
a concern that if the economy is bad then people decide to go 
back to school, or to stay in school because the jobs are not 
out there, I think there is some legitimacy to that. Except 
that these trends of greater school enrollment really go back a 
long way. They predate the recession by quite a lot.
    Representative Maloney. And now I would like to read you a 
statement, if you could please evaluate this for us, and I 
quote, ``I think we are facing enormous economic challenges in 
this country. The Obama economy has led to the lowest labor 
force participation since 1978.'' End quote.
    And given the significant impact of demographics and 
choosing to continue education, as well as other longer-run 
factors that predate the Great Recession and the Obama 
Administration, do you think it is a misrepresentation of the 
data to say that the Obama economy led to the lowest labor 
force participation since 1978?
    Dr. Winship. I think it was a contributor to the decline. I 
do not think it is fair to say that it was the most important 
factor, by any means. But a lot of the expansions of our safety 
net programs that occurred during the first two years of the 
President's first term I think now need to be wound back a 
little bit. Because I do think the evidence from welfare reform 
in the 1990s really does show that the work disincentive there 
can be a real problem.
    Representative Maloney. Well, Dr. Jacobs, could you 
comment? Do you believe the previous statement I read in fact 
is a misrepresentation of the data?
    Dr. Jacobs. I think to say there is a causal relationship 
between the Obama economy and the labor force participation 
rate is a serious overstretch.
    We know that at least half of the decline over time has 
been due to demographic factors. We know another approximately 
sixth of it is due to cyclical effects that we could have 
expected from any economy. And then we have got a residual, the 
leftover bit, that could be explained by a lot of different 
things, including the fact that this recession was unlike any 
recession we have seen ever before.
    So I think it would be a serious overstretch to claim that 
there was a causal relationship between the two. I would also 
note that many of the expansions to the safety net put in place 
in the first two years of the Administration in response to the 
crisis did little to alter existing work requirements.
    Representative Maloney. So would you agree, Dr. Winship, 
that the ``92 million Americans who aren't working'' are either 
retired or, as she says, half of it was due to these other 
factors that we mentioned--retirement, and getting an 
education, and other factors?
    Dr. Winship. It is as good a guess as any. I mean, I think 
they were important. I don't think that much of the expansion 
of the safety net was--involved work requirements, 
unfortunately. I disagree with that point.
    Representative Maloney. Well my time has expired.
    Chairman Coats. Congressman Brady.
    Representative Brady. Thank you. And even in this 
Administration, you can't claim jobs, you created it, and then 
ignore those who can't find a job. They are related to the 
fiscal policies of this Administration. This was a serious 
recession, no question. Financial crises are difficult. 
Absolutely. No question.
    It is certainly not the greatest recession, or anywhere 
close to the Great Depression. In fact, in modern times 
President Reagan's recession he had to deal with had a higher 
unemployment rate, 10.8 percent.
    The question here today is how do we bounce back faster? 
This has been a terrifically disappointing recovery. Every 
month we add new jobs is a good month, by the way. But we know 
we can do better. And in fact the Reagan recovery was almost 
three times faster economic growth.
    So the question is how do we get people back in the work 
force? So I agree with Dr. Winship. I think there is--some of 
the obstacles are the need to rebalance our regulatory process. 
We need a much better tax code, to be competitive. We need a 
sound dollar going forward. That's the foundation for growth. 
And we need more freedom to trade around the world. No 
question.
    But, and to Dr. Mathur, to your testimony, you talk about 
two things. Could you expand on them? One is, government tends 
to stick with the stale old 20th Century responses in our 
assistance programs, while states are looking at more 21st 
Century smarter work incentives.
    Can you talk a little about the difference between the poor 
work incentives that were expanded to a big degree in response 
in this recovery? I think Dr. Casey Mulligan who you cited in 
your testimony, and then you also mentioned the Wisconsin 
FastForward initiative as a way, as a modern way to actually 
tackle the labor participation issue.
    Can you expand on sort of that dichotomy between the stale 
old ideas we have been implementing and the things states have 
been doing?
    Dr. Mathur. Absolutely. Thank you for the question.
    As I mentioned in my testimony, there is a lot of research 
out there by Dr. Casey Mulligan which cites the Affordable Care 
Act and also the extension of Unemployment Benefits, and other 
welfare programs which were definitely needed at the time, but 
which also create work disincentives.
    So if we talk about the Affordable Care Act, the subsidies 
that were provided to people at 100 to 400 percent of poverty 
had--could create the incentive to avoid, to stop work, or to 
not take up full-time jobs. And the reason for that is that the 
size of the subsidy, or the value of the subsidy, was a lot 
higher if you took up a part-time job, if you worked fewer 
hours in a year, or if you spent fewer weeks working.
    And at the same time, if you had a full-time job with 
health insurance you were not given the full value of the 
subsidy, whereas if you had a part-time job where you were not 
offered insurance, the value of the subsidy was a lot higher.
    As economists, you know, we believe that these incentives 
matter at the margin. You know, we will see how this plays out 
in the future and whether this actually does result in a lot of 
people sort of choosing not to work, but these incentives 
absolutely do exist in the current system under the Affordable 
Care Act.
    I also mentioned the minimum wage increases and why I think 
having sort of wage subsidy programs like the EITC is a better 
alternative to minimum wage increases. We agree that there is a 
large literature on whether minimum wages have disemployment 
effects, or they don't have employment effects. I don't think 
anybody is arguing that it would actually increase employment.
    And to my mind, the risk-free strategy then is to expand 
the EITC. We know that the EITC is a hugely successful program 
at getting single mothers into the labor market. It is hugely 
successful at helping families with children, helping low- and 
middle-income families, without the negative employment effects 
that we see--that are possible with minimum wage hikes.
    So I have always talked about if we want to help low- and 
middle-income people, even people on minimum wages, I think a 
better idea is to expand the EITC.
    Now to your point about what is happening in the Wisconsin 
FastForward initiative program, there the funds through the--my 
idea is to create the right incentives for employers to hire 
people out of the pool of long-term unemployed, or hire people 
out of the pool of unemployed; provide tax credits to 
employers, which are used to provide job training, skills 
training to workers who would ordinarily not be hired by 
employers because they are looked upon as long-term unemployed. 
We don't know what their experience level is.
    But through these programs, you can provide them jobs 
training. The employer shares some cost of that training, but 
in the long run the worker is matched to a job. And I think 
that is a far more effective strategy at getting these people 
back into the labor market than just, you know, doing it either 
through minimum wage increases or through welfare programs.
    Representative Brady. Thank you, Doctor.
    Mr. Chairman.
    Chairman Coats. Senator Cassidy.
    Senator Cassidy. Well let me start off by saying this.
    Would you agree that it is not--the people who are having 
the hardest time are the fellow or gal who has a high school 
education, maybe a year or two more, but not a college 
education? Semi-skilled, if you will, a crafts person, blue 
collar? Everybody agrees with that?
    (Nods in the affirmative.)
    Now I have been struck, and we have a slide but I do not 
think we have time to put it up, about how the part-time and 
voluntary labor force has gone up.
    And, Dr. Mathur, you quoted Dr. Mulligan's information that 
this quite likely could be due to the Affordable Care Act. I 
think there is good academic data from the Federal Reserve in 
San Francisco and elsewhere that if you tax full-time 
employment for the low-wage worker they tend to be made part-
time. Fair statement?
    I also notice that there are some states doing really well 
in creating those blue collar jobs, and those are typically the 
oil patch from North Dakota, Oklahoma, Texas, and Louisiana. Is 
that a fair statement?
    And so that goes along with the idea that blue collar 
workers have traditionally been employed in mining, 
manufacturing, and construction. And an energy-based economy 
creates mining, obviously, which in turn manufacturing in terms 
of construction. Fair statement?
    Now the structural changes that you speak of, are you 
speaking, as you mention structurally, of the increased 
regulation of our jobs market? Because you point out that 
there's academic literature that shows with increased 
regulation, you have fewer jobs.
    Is it the fact that we are moving away from mining, 
manufacturing, and construction, turning our back, for example, 
on things like Keystone-XL, which would have created 40,000 
construction jobs? Or otherwise doing our best to inhibit 
natural gas and oil production and coal production? Is that 
what you mean by a structural change? That we are just turning 
our back on those mining jobs that would otherwise create 
prosperity, as they are in North Dakota, Texas, and Louisiana, 
et cetera?
    Dr. Winship.
    Dr. Winship. Thank you, Senator.
    So when I think about structural issues, I do tend to think 
about diminishing dynamism. And as I said, part of that is 
business dynamism, but I think a second part of it I did 
mention that does relate to your invoking the strong economies 
of the oil states is, we may have less dynamism as Americans, 
as well.
    In the past, probably the most important way that people 
found opportunity was to move to it. So you have the Westward 
migration. You have the great migration of African Americans 
from the South, the migration of poor whites from Appalachia, 
to where the jobs are.
    Senator Cassidy. May I interrupt, because we have limited 
time. Dr. Mathur points out, though, and maybe your assessment, 
I don't think yours Dr. Jacobs, that if you give long-term 
unemployment people have less incentive to move. I think you 
quoted that.
    I have read similar articles like that from The New York 
Times. If you are doing relatively well, why would you move to 
North Dakota? Because you live in Ohio, and all your friends 
are in Ohio. Are you with me?
    Dr. Winship. I think that is right, yes. And I think that 
we ought to make our unemployment insurance system--it is a 
great example. To the extent we can incentivize people to where 
the jobs are when that makes sense for them, that is the sort 
of safety net reform I think that would be helpful for 
expanding----
    Senator Cassidy. And structural also includes, from what 
you just said, how we structure unemployment insurance and 
whether or not we are disincentivizing people from moving from 
where there are no jobs to where there might be jobs. Fair 
statement?
    Dr. Winship. Absolutely.
    Senator Cassidy. Now in terms of the mining, manufacturing, 
and construction, I always considered mining as an important 
part of that. And if we do not have the energy, inexpensive 
energy for energy-intensive enterprises, are we really going to 
return to the kind of manufacturing that created those strong 
blue collar jobs with good benefits? That may be beyond your 
expertise, but I ask that question for an opinion.
    Dr. Winship. You know, I think we are probably never going 
to return to the kind of robust manufacturing-based economy 
that we had in the 1950s. That said, I think it is important 
that we do as much as we can to expand manufacturing in the 
United States.
    I think that other jobs outside of manufacturing can and 
are good jobs in many cases. And so----
    Senator Cassidy. Yes, but I do not see those blue collar 
workers' service-related jobs typically bring the same sort of 
wages with better benefits. You put somebody on an oil rig--I 
am from Louisiana--and with overtime he can make upwards of 
$100,000 a year. I mean, that is great. A fellow who has two 
years of training after high school sort of thing.
    Now I will finish by saying I think there are examples--
Texas, Louisiana, North Dakota--where blue collar workers are 
doing pretty well. Houma, Louisiana, had the lowest 
unemployment rate in the Nation, or second lowest, for several 
years running, creating those blue collar jobs.
    On the other hand, if you regulate the economy or 
disincentivize otherwise, or discourage the use of our natural 
resources to create jobs, we are consigning them to a tougher 
life.
    I thank you. I yield back.
    Chairman Coats. Congressman Delaney.
    Representative Delaney. Thank you, Mr. Chairman, for 
assembling a group of experts that really bring a tremendous 
amount of intelligence on this topic. So it has been a great 
conversation.
    I was inspired by my friend from Texas who was quoting 
Ronald Reagan, and it made me think. President Reagan had a 
good quote, where he said there are no easy answers, but there 
may be simple solutions.
    And, Dr. Jacobs, you said something earlier that I think 
really could be the simple solution to this very complex 
question, which is infrastructure. Because when you think about 
what we have and the facts that you have described, while it is 
interesting to look at prior recessions, it is intellectually 
interesting, it is informative to some extent, it is not really 
dispositive. And in fact, if you want to look back to prior 
events, we should look back at the industrial revolution and 
what happened there, and the disruptive effect that had on the 
workforce.
    And there was a public policy response, which was to 
educate people so that they could be better equipped in the new 
world. And there is a little bit of that going on today. So we 
have demographics which are changed, and clearly affect the 
outcomes here. So to compare it to prior recessions, again, is 
not all that relevant.
    We have this tremendous kind of steep trajectory of 
technological innovation, which I tend to think is a much 
bigger contributor to this problem than people give it credit 
for. It is also a contributor to a decline in the standard of 
living because it leads us really to creating two types of 
jobs: high-skilled, high-paid jobs which are growing quite 
rapidly; and low-skilled, low-paid jobs which are generally 
people who are serving the high-skilled, high-paid people, 
right? And there is this huge lack of middle-skill jobs.
    And I am very optimistic and confident that the U.S. free 
market system will solve this problem over time. Because again 
if you go back to other periods of disruption like the 
industrial revolution, you had lots of disruption and you had 
these similar kinds of pressures. But ultimately there was the 
creative side of creative disruption that kicked in, and you 
got a lot of new jobs, and I think that will happen here.
    But it seems to me we need a bridged demand program that 
will put demand in the labor market for middle-skill jobs, and 
solve a lot of these problems. And so the simple answer, going 
back to President Reagan's kind of framing, would be 
infrastructure. Right? It's good for the country. It's good for 
our citizens. It's good for businesses. It's been proven, if we 
dynamically scored it, to be a good investment, and it creates 
jobs.
    So I am just interested, Dr. Jacobs, I think I know your 
view on it because you mentioned it and it inspired my 
question, so thank you for that because it gave me something to 
say. But Dr. Winship and Dr. Mathur, what do you think of that? 
How do you think a big national infrastructure program would 
affect the outcomes on some of these disturbing statistics?
    Dr. Mathur. I mean I do think there is a potential for a 
big infrastructure program, or funding highways to----
    Representative Delaney. Assuming we paid for it in a smart 
way, right?
    Dr. Mathur. Yes.
    Representative Delaney. Obviously you want to premise it 
with that.
    Dr. Mathur. If it was efficiently done----
    Representative Delaney. Like fixing the international tax 
system and generating revenues and building infrastructure, for 
example. But, I'm sorry.
    Dr. Mathur. Yes, I think there is the potential. I also 
think there are other ways--if you mentioned that it is the 
lack of skills that, the middle-skill jobs that are being lost, 
I think there are also other ways to do it, which is skills 
training, or training our youth to get into the labor market 
through paid apprenticeship programs.
    But I do think that the multiplier on sort of highway 
infrastructure spending is large, and there could be economic 
benefits in the long run.
    Representative Delaney. Dr. Winship.
    Dr. Winship. I'm not opposed philosophically to more 
infrastructure spending. I think in practice it probably would 
not be paid for, and so I think that would be a mistake to do 
that. I think the infrastructure problem has been a little 
overstated. There is a nice paper by Evan Soltas at Columbia 
University, I think, who makes a pretty strong case I think 
that our concerns about infrastructure have been a little bit 
overblown.
    And I also think that framing--talking about infrastructure 
in the context of labor force participation also frames the 
problem as being primarily a demand side problem. And as my 
testimony probably makes clear, I am a little bit skeptical of 
the extent to which the problem is on the demand side versus 
some supply side issues we have.
    Representative Delaney. Dr. Jacobs, I will give you an 
opportunity because I sense I know your answer but----
    Dr. Jacobs. I think you are probably right. I mean, as I 
said earlier, according to analysis by the International 
Monetary Fund, increased infrastructure spending can boost 
short-term economic growth by 1.5 percent in the short run. 
This seems like something we could use. It would create jobs in 
the construction industry, which was one of the hardest hit by 
the Recession and, like many industries, has recovered more 
slowly than we might like.
    So it seems kind of like a win/win. I feel like every day 
that there is a news story about a train derailing, or a 
highway that is far bumpier than I would like to see and feel 
safe on, so it is clearly a problem that is worth solving for 
other reasons as well. We know investing in infrastructure 
yields long-run rewards across a variety of outcomes.
    Representative Delaney. Thank you.
    Chairman Coats. Congressman Paulsen.
    Representative Paulsen. Thank you, Mr. Chairman. I 
appreciate the testimony we have had here today, as well. I 
know some believe that it is okay to accept slower economic 
growth and a lower workforce participation rate, and accept 
this as sort of new normal, and it is okay for wages to be flat 
for such a long period of time, or it is okay for record 
numbers of people that are working part-time that would like to 
work full-time, and it's okay for millions unfortunately to be 
in this chronically unemployed category, but I want to ask this 
question.
    The focus of the hearing here is the participation rate, 
what the work opportunities are, what the incentives are, and 
how do we improve the situation. It seems we are looking at two 
sides of the labor coin here.
    On the employer side, you have got the fact that many 
businesses are unable to fill the positions that they have 
available, because they cannot find eligible candidates to fill 
the jobs and the requirements.
    Then you have got the employee side of the equation where 
you have got involuntary part-time workers, six-and-a-half 
million, as you mentioned, Dr. Mathur, that cannot seem to find 
the additional hours that they want to work, either because 
they cannot find the job with more hours, or possibly because 
there are policies that have left their employer in a position 
with the undesirable option of cutting hours to avoid 
regulatory penalties.
    So, Dr. Mathur, if I can ask you this: In your estimation, 
what can be done on the employer side to help find qualified 
applicants? And what kinds of programs, perhaps 
apprenticeships, can employers embrace to hire workers that 
might also then reduce the concern that workers may transfer to 
a different employer after they've invested so much time in 
getting the training/and getting the expertise?
    Dr. Mathur. So I have talked a lot about for youth who are 
graduating, I think we do need paid apprenticeship programs. 
What we are seeing is that a lot of them are reaching the labor 
market with high levels of student debt but unable to find 
jobs, and therefore being sort of permanently scarred, or 
scarred for long periods of time because they do not have the 
incomes to pay off the debt and they are not getting the right 
jobs.
    So I think we are seeing experiments around the country 
where I was reading yesterday about an apprenticeship school 
where, you know, if you're in high school, or if you decide not 
to go to college, you can go into these schools and basically 
get training. Or even in school go and work at an employer and 
be trained for exactly the job that you might be required to do 
after you graduate.
    So I think those kinds of programs are extremely important 
currently, given that youth unemployment has doubled, the 
official unemployment rate. Those kinds of programs would 
really help our youth to get the jobs that they need.
    On the other side of the pool of unemployed who are not 
finding jobs and the employers who are willing--who are not 
willing to hire them because they are afraid of what their 
skills are, or how much experience they have lost, I think 
experiments like we just mentioned, the Wisconsin FastForward 
initiative where employers are actually being provided tax 
credits to hire exactly out of this pool and provide these 
workers the training that is needed on the jobs, that they can 
perform these jobs more efficiently, be more productive, get 
the skills that they need, I think those programs around the 
country would be successful at solving the problem of 
unemployment and getting the employees the skills that they are 
looking for in these employees.
    Representative Paulsen. You mentioned this apprenticeship 
school you saw recently. Was that in a certain state? Or is 
that something we could look at?
    Dr. Mathur. I think it was in Virginia. I just read the 
news yesterday, I think, in Newport News, Virginia.
    Representative Paulsen. Dr. Winship, do you have an opinion 
in terms of what can be done to remove regulatory barriers and 
better enable workers to contract more freely with their 
employers on the type of hours, pay, and benefits that they 
would like to receive?
    Dr. Winship. Sure. You know, I think the best proposal that 
I have heard for regulatory reform would set up a commission 
that would essentially enumerate the worst regulations out 
there. And you could certainly enumerate the worst ones for job 
growth, or for wage growth.
    And then the commission would present the whole menu, and 
there would be an up or down vote on whether to rescind them or 
not.
    I do think occupational licensing is another, is another 
really important issue that Dr. Mathur mentioned. And this goes 
back to the dynamism question. There are a lot of people who 
are protected from competition which props up their wages. So 
if I am a florist in a state that has undue regulations on who 
can become a florist, that's great for me but it is not very 
good for all of the people who might be unemployed, might be 
long-term unemployed who would do a whole lot better if they 
could become florists.
    So I think occupational licensing is really important. 
Figuring out what the federal hook is there I think is a tough 
question.
    Representative Paulsen. Thank you, Mr. Chairman.
    Chairman Coats. Senator Lee.
    And, excuse me, I might just note that the Senate votes 
have already been called. There is enough time for Senator Lee 
to do his. The House has not been called yet. I just talked to 
Congresswoman Maloney. I am going to turn this over to her. 
That is where we are. Congressman Schweikert, I think you are 
next on the list, and Dr. Adams. Is that correct? Adams is 
first on the list, and then Congressman Schweikert.
    And so as long as the House can stay, I am happy to put the 
gavel in the hands of our Ranking Member here but, Senator Lee, 
you are on.
    Senator Lee. Thank you. Thanks to our panelists for coming 
here today. We appreciate your insights, as always.
    Dr. Winship, let's start with you. As you are aware, policy 
decisions and policy changes affect decisions at the margin. 
The individuals who are on the edge of perhaps dropping out of 
the labor force are in many instances facing a difficult set of 
questions, questions involving whether or not to work one more 
day, or to spend one more day looking for work, based on a 
determination as to whether these kinds of efforts are worth it 
relative to retirement, considering ways possibly to justify an 
SSDI claim.
    You have written before that, on the subject of SSDI, and 
the sometimes perverse incentives that workers on the margins 
may face when presented with an opportunity to make a claim on 
SSDI. With the SSDI Trust Fund set to run out of money next 
year, what if any policy reforms might you suggest that could 
improve workforce participation, particularly at the margins?
    Dr. Winship. Thank you, Senator. I think it is a really 
important question. The reforms that I propose in the article 
that I have written for National Affairs on this range from, 
you know, you could create markets for private long-term 
unemployment insurance. I think SSDI has become really a long-
term unemployment program for folks who, depending on economic 
circumstances, would be employable. They are not actually 
disabled in that sense.
    I think we could do things like experiment with experience 
rating of payroll taxes for employers. That is to say, if a lot 
of your employers go on to receive SSDI, then your share of the 
payroll tax would actually be higher. Now if you do that, you 
have to allow employers to also be able to get involved in the 
determination of eligibility for their former employees. So it 
is sort of a big step.
    You can toughen eligibility requirements for people who are 
applying. You can make it easier for people who are actually 
disabled and on SSDI to work while at the same time making it 
more difficult for people who are not disabled in the sense of 
not being able to work by having more reviews of eligibility.
    So I think there is a range of things you could do. You 
could update the listing of occupations, which the Social 
Security Administration uses to determine whether there are 
jobs out there that people could do.
    So I lay out a dozen or so different proposals in this 
piece I have written.
    Senator Lee. Thank you.
    Employers are facing a slew of new regulatory challenges 
from the NLRB's Joint Employer Rules, the Department of Labor's 
proposed rule, proposed overtime standards that came out at the 
end of the month last month. How do you think these rules will 
ultimately impact the job market in general for the burdens 
they add to the employers, taking into account that employers 
are half of the equation here?
    Dr. Winship. Yes. I think just like the minimum wage debate 
that is happening right now, I think any time that you increase 
the costs that employers have to pay for their workers you face 
a real risk of helping some people who benefit from it. But at 
the same time, hurting a lot of people who do not get the 
benefits of dynamic job growth in the future.
    I think we have to be really careful. And this is a case 
too where I think a lot of the statistics about stagnating 
wages have been overstated, and we actually treat the problem 
as in some ways different than what it actually is.
    Senator Lee. Dr. Mathur, I saw you nodding. Do you have 
anything to add to that?
    Dr. Mathur. On the overtime rules, we actually have good 
research looking at the impact of proposed overtime 
regulations, or changes in overtime regulations and the effect 
on worker hours and worker wages. And there are two good 
studies out there that I found that basically said that when 
you have overtime--when you are required to pay workers time-
and-a-half for every hour that they work over 40 hours a week, 
the employer either cuts down the base wage, or if they are 
already at minimum wage they cut down their hours.
    So even though we know that these rules are out there to 
help workers, I think that in the long run there could be 
potential negative unintended consequences for the workers that 
they are trying to help.
    Senator Lee. For a minute there I thought you might be 
making a plug for the Working Families Liability Act, to which 
I would make a plug for but for the fact that I am out of time. 
So since I am out of time I am not going to make a plug for the 
Working Families Flexibility Act, which would help this all.
    [Laughter.]
    Thank you very much for your answers. Thank you, Mr. 
Chairman.
    Chairman Coats. Dr. Adams, and now I am turning the gavel 
over to Congresswoman Maloney.
    Dr. Adams. Thank you, Mr. Chair. Madam Ranking Member, 
thank you, as well. I thank you all for your testimony.
    Dr. Winship, let me return to your statement about 
misinterpreting data more often than not could be an 
exaggeration of economic challenges.
    Some have stated that the labor force participation rate is 
at its lowest level in nearly 40 years, and they use this 
narrow fact to imply that the Obama Administration is the cause 
of slipping labor force participation rates, but those same 
people often make no mention whatsoever of demographic trends 
like the retirement of baby boomers. I am a baby boomer. I 
retired just a year-and-a-half ago. Or of large numbers of 
young people who are going back to pursue a college education.
    So do you think that this narrow presentation provided, 
without mention of those factors, exaggerates the economic 
challenges that we face?
    Dr. Winship. I do. And I think, just to be clear, I think 
we do have to distinguish between the demographic and 
structural changes that in some ways are beyond what policy can 
affect. But I think that's not to say that there are not better 
or worse policies that can also affect labor force 
participation rates.
    So I do not want to leave the Administration completely off 
the hook. I do think that some of the expansions in the safety 
net, I think the things, the regulations in the ACA and this 
overtime rule do affect labor force participation at the 
margin.
    Dr. Adams. So would you say that Senator Lindsey Graham was 
exaggerating the economic challenges when he said the labor 
force participation rate is at an all-time low?
    Dr. Winship. I am not familiar with the quote so I cannot 
really answer that.
    Dr. Adams. Okay. Let me move on and ask you about the 
unemployment rate as it relates to African Americans. It stands 
at over 9 percent, about 9.5 percent, compared to 4.6 percent 
for Caucasians.
    So, Dr. Winship and Dr. Jacobs, if you would respond, could 
you explain why the unemployment rate is so high for African 
American workers relative to other workers? And what policies 
might we consider to specifically help increase the African 
American participation in the labor market and lower the 
unemployment rate there?
    Dr. Jacobs. You are exactly right that the unemployment 
rate amongst African Americans is higher, particularly for 
young African American men. And I will return to one of the 
points that I touched on earlier in terms of criminal justice 
reform.
    The incarceration rate in the United States is the second 
highest in the world, second only to the Seychelles. Research 
suggests that incarceration rates and crime rates have been 
pretty much entirely unrelated since the 1990s. So there's 
plenty of room for reform without a spike in crime. And we know 
that the African American population is much more impacted by 
our criminal justice policies.
    So there is good reason to believe that what is going on in 
the criminal justice system and what is going on in the labor 
market are interacting in a way that is really pretty harmful 
for African Americans, particularly young African American men.
    We know that 9 in 10 employers say they conduct criminal 
background checks, which in turn impact the ability of those 
with a criminal record to get a job. No matter how severe the 
crime, no matter how old they are, no matter how old that crime 
may be and how far in their past history it might be.
    So there is a lot of potential I think for reforming the 
way that we deal with incarceration in this country, and also 
in terms of thinking about how employers may be discriminating 
against those with a criminal record and how that might be 
holding back labor force participation and pushing up the 
unemployment rate amongst African Americans.
    So that is just one area that I think could have a major 
impact on a particularly troubling issue.
    Dr. Adams. Dr. Winship.
    Dr. Winship. I think criminal justice reform is important, 
but I do think that it would be wrong to focus on that as the 
ultimate source of these different employment outcomes.
    You know, the gaps between African Americans and whites 
open up very early by the time kids start kindergarten, for 
instance. There are vast test score gaps. So I look at the 
issue as chronic childhood poverty. And it is very clear from 
research by Patrick Sharkey that African Americans are much 
more likely to grow up in concentrated poverty. So I think we 
need to experiment with a number of interventions at the state 
and local level.
    There's a program I will plug called ``Ready For K'' in San 
Francisco where they are giving parents text messages about how 
to read to their kid and help their kids develop 
intellectually. And I think the research by Raj Chetty about 
concentrated poverty and segregation really points towards 
trying to help more people move to opportunity, as I said 
before, and move out of poor neighborhoods to areas that are 
going to support their intellectual development more.
    Dr. Adams. Thank you very much. I think I am just about out 
of time. You know, I look at North Carolina. We do not have 
adequate jobs and certainly jobs that do not pay us enough, and 
so I think we are going to have to think more about living 
wages as we talk about people taking on work, and if that work 
does not help them sustain their families. And there is an 
issue with that, too. But thank you. I yield back, Madam Chair.
    Representative Maloney [presiding]. Thank you.
    Congressman Schweikert.
    Representative Schweikert. I never thought I would be 
saying this--thank you, Madam Chairwoman.
    [Laughter.]
    Representative Maloney. Wow.
    Representative Schweikert. Dr. Mathur, give me the best 
pronunciation, because I have heard two. Math-thur?
    Dr. Mathur. Ma-tur, yes.
    Representative Schweikert. Mathur, okay. So there are a 
couple of variations here. You have written about barriers to 
entry and the change in the last couple of decades of the 
ability to have certain types of employment because of the 
regulatory state. And I have seen some other data that actually 
said that also for particularly minority populations it is an 
even greater effect on their ability to become a barber, to 
become some sort of licensed profession.
    How much are you seeing that movement of barriers to entry? 
And I accept that may be more of a state and local, but also 
with the new economy? If I am going to become a Uber driver, or 
somehow participate in the new hyper efficient economy we are 
now seeing a movement of barriers to entry to stop that one 
thing that really does seem to be producing entrepreneur job 
growth.
    Dr. Mathur. Right. I absolutely agree with you. So when you 
look at the data on occupational licensing, as I said, there 
has been a tremendous increase in the percentage of jobs that 
are now required--which require people to hold the job, and the 
costs have gone up, and the time investment has gone up in 
these jobs and that is clearly a barrier to entry, and that is 
affecting entrepreneurship and just regular job growth.
    But you also look at--you see that we talked about how the 
economy finds ways to sort of overcome some of these barriers, 
and I think we are seeing that with the new sharing economy, 
with the new gig economy, and how people are just using the 
assets and skills that they have already to generate income for 
themselves. And I think the more we try to regulate that, I 
think these avenues are going to be closed to us.
    Representative Schweikert. Doctor, if I wanted to actually 
get better educated on that subject, if anyone is actually 
doing some quality academic research on both the barriers to 
entry and also the effects on sort of the new economic growth, 
and also what I see happening at many of our state, local, and 
even some of the federal, of trying to protect incumbency----
    Dr. Mathur. Right.
    Representative Schweikert [continuing]. In businesses and 
tax systems, what would I go out and read?
    Dr. Mathur. Alan Krueger actually has a study, Krueger and 
Kleiner have a study on Occupational Licensing that shows the 
changes over time and the regulations over time that are 
causing the barrier to entry. But Alan Krueger has also 
actually done a study with Uber driver partners showing the 
economic impacts and saying so many people are benefitting from 
being driver partners at Uber.
    Representative Schweikert. And actually it's much, much 
bigger than just Uber. That's just the easiest one that's 
touched so many lives, and my understanding is there's a 
disproportionate pushback on those who are poor and minority 
and the regulatory state is actually starting to step into 
these.
    Dr. Winship, you touched on it but I would like to--because 
I think actually you have written on this--in the last quarter 
century, the greatest demographic movement from poverty into 
middle class, that movement velocity that used to be the 
hallmark of American society, wasn't it after the 1996 Welfare 
Reform Act, and now that all those reforms are gone, we have 
lost that velocity?
    Do I state it correctly? And how do I understand this 
better?
    Dr. Winship. So I think that it is probably too early to be 
able to say that the welfare reforms of the 1990s did improve 
child opportunity, for instance, because the kids that 
experienced it----
    Representative Schweikert. But we do see the datasets of 
those who were recipients and five years later that their IRS 
income has dramatically changed.
    Dr. Winship. That's right.
    Representative Schweikert. So I was using IRS data.
    Dr. Winship. So for single parents as a whole, for children 
as a whole if you look at child poverty, if you look at the 
poverty rate for female head of families, all improved a lot 
after welfare reform was passed. Employment increased a lot 
after welfare reform was passed.
    Then you had a recession in the early 2000s. You had the 
Great Recession obviously. But poverty stayed down. Most people 
are not aware that if you include a measure of poverty that 
counts as income, things like food stamps, and the Earned 
Income Tax Credit, and things like that, poverty increased less 
in the recession of the early 2000s, and even in the Great 
Recession, than it did in the recessions of the early 1990s and 
the early 1980s. And that was because the safety net did step 
in. So I think it is a system of making it harder to not work 
and remain poor, but easier to work and escape poverty through 
things like the Earned Income Tax Credit.
    Representative Schweikert. So sort of the cyclical balance 
that we seem to have lost.
    Dr. Winship. Right. So the fear is that as you reform 
welfare, then you are going to help people in good times, but 
in bad times it was going to be really bad. And it looks like 
that did not actually happen.
    Representative Schweikert. I yield back, Madam Chairwoman.
    Representative Maloney. Congressman Hanna from the Great 
State of New York.
    Representative Hanna. Ms. Jacobs, you talked about levers 
people can pull, the government can pull, to improve people's 
circumstances. Ms. Mathur pretty much talked about levers that 
the government has pulled that can cause people to be more or 
less a part. You talk about inequality.
    It is interesting to me that the dynamics of helping people 
and wanting to do right by people can actually cause in some 
ways a permanent situation of inequality by giving them certain 
disincentives, and we all talked about them.
    I want to shift. Universal pre-K. You have all mentioned 
that to some degree or another. I think it is critical that we 
support that as a government, writ large. But--I think it is 
pretty clear that the labor participation rate is trending 
downward, and we have talked about the causes. But would 
anybody like to just venture into it? You, Ms. Mathur, have 
done a pretty good job of telling us why certain things have 
disincentivized people to participate. And I think that causes 
inequality that is unintentional. But universal pre-K.
    And you talked about prisons and incarceration rates. There 
is a Strong Start for Children Act that Arnie Duncan's got out 
there that I frankly like very much. Would anybody like to talk 
about that subject matter? I know it's a little bit off, but I 
think it directly relates to breaking the back of 
intergenerational poverty, particularly with minorities.
    Dr. Jacobs. I love talking about universal pre-K. As a 
resident of the District of Columbia and someone who benefits 
directly from the fact that D.C. has near-universal pre-K, I've 
seen it for my own family. But more importantly, there is great 
research suggesting that even directly on the topic of labor 
force participation, which is not necessarily what we 
automatically think about when we talk about----
    Representative Hanna. But it does, doesn't it? It really 
does.
    Dr. Jacobs. It does. It does. It definitely does. I mean, 
we know that for every 10 percent reduction in the cost of 
child care, the employment rate of women increases by about a 
half percent, according to a range of studies. Which a half a 
percent does not sound like a huge number, but it actually is a 
really big move of the needle on something like labor force 
participation.
    There are a host of studies on the long-term impacts of 
universal pre-K and high-quality early education for kids. I 
think there are reasons to think that it will improve long-term 
labor force participation and the quality of our workforce for 
kids, but there are also reasons to think that it would have a 
real bang for our buck----
    Representative Hanna. All of this happens on the margin. 
That is the one thing we have all established, that so much of 
all of this is, integral changes in how we, in the decision 
process people go through and how they support themselves and 
their family and their decisions.
    And there is an old thing you may remember from the 1950s 
of the negative income tax. One of the problems with welfare is 
that it essentially taxes you, in some cases 100 percent of 
your income, so your marginal willingness to shift is--it is 
not an unthoughtful thing to do. It is in many ways reasonable 
but unfortunate.
    Mr. Winship, what would you like to say about that, if 
anything?
    Dr. Winship. Sure. Well I guess I would say a couple of 
things. The first I think is that we ought to distinguish 
between something like universal pre-K for its childcare 
benefits versus for its benefits on kids. And I think on the 
latter the evidence is not especially strong that we are able 
to scale up programs in ways that actually will improve kids' 
outcomes in the long run.
    The second thing I will say is that the universal aspect of 
it I think is an inefficient way to go about this. You end up 
subsidizing a lot of----
    Representative Hanna. Well actually the bill is 200 percent 
and below. We could argue about the margin, but----
    Dr. Winship. Sure. Well I think that makes a lot more----
    Representative Hanna. That is what it is. Thank you very 
much. Do you generally agree, though, Ms. Mathur, that we have 
created a society out of our good nature and willingness to 
help one another that unintentionally not just disincentivizes 
work but actually incentivizes and causes inequality, the one 
thing we are trying to avoid, or one of the things we are 
trying to avoid?
    Dr. Mathur. Yes. Some of the policies that we have good 
data on of what the likely effects are likely to be, I think we 
try to help but I think we----
    Representative Hanna. Forty to thirty hours guarantee----
    Dr. Mathur. Yes.
    Representative Hanna. Would that be one of the things?
    Dr. Mathur. It is absolutely one of those things where you 
could see a greater shift towards part-time.
    Representative Hanna. And you can see that, and there are 
numbers to support that?
    Dr. Mathur. Yes. There is some anecdotal evidence right now 
to support that.
    Representative Hanna. Thank you very much. My time has 
expired.
    Representative Maloney. Thank you so much. And we have been 
called to vote, so I am going to call on Congressman Grothman 
and have him assume the leadership of the committee so I can 
run over there and make sure I don't lose a vote.
    Representative Grothman. Good. And you tell them not to 
close that rule.
    Representative Maloney. I will try to keep it open for you.
    Representative Grothman. Okay. I would like to thank you 
for being here today. I can't help but notice in my District, 
and my District has more manufacturing jobs than any other 
district in the country, one of the major problems my employers 
are having is they cannot find people to work. And beyond 
manufacturing, but retail outlets, everybody, you know, is 
looking for more jobs--more employees. Truck driver, a job that 
I don't think I could do, it's a tough job, but a lot of people 
could do it, but, man, they can't find anybody to drive a truck 
today.
    But I thought I would use my little time here to clean up 
some misconceptions that some have put forth.
    First of all, as a follow up from Congressman Hanna, at 
least from what I have read, when you look at a program like 
Head Start, you know, would you, just because you are the 
doctors in the room, would either of you like to tee that one 
up and give a shot as to whether everybody agrees that pre-K, 
if we say Head Start as pre-K, is successful? Do you think it 
is a successful thing?
    Dr. Mathur.
    Dr. Mathur. I think from my review of the literature there 
is a mixed--you know, there's a mixed set of results. Some 
people find that, you know, it is beneficial; some people find 
that it is not.
    Representative Grothman. I guess the American Enterprise 
Institute is a little bit to the left of the Brookings 
Institution.
    [Laughter.]
    Dr. Winship, do you want to tell us what the Brookings 
Institution says about that, Head Start?
    Dr. Winship. I think the Brookings Institution basically 
has I think Dr. Mathur's line on it, I think, which is it's a 
mixed bag but I think there's reason to be skeptical. I think 
Rus Whitehurst I think has a lot of really important points 
about the case that Head Start ought to be expanded, where he 
has talked about the different randomized experiments that have 
happened, and how disappointing some of those have been.
    So I do think expanding Head Start is putting a little bit 
of faith where the evidence really is not there to support it.
    Representative Grothman. Right. Now I want to do a follow 
up on you, Dr. Mathur. Earlier you said positive things about 
the Earned Income Tax Credit. When I talk to my employers, 
their employees are fairly sophisticated and they know that the 
amount you get in the Earned Income Tax Credit maybe peaks out 
between that $10- to $15,000 range, and they find some of their 
employees don't want to work the extra hours because of the 
Earned Income Tax Credit. In other words, it encourages you to 
take a part-time job. It discourages you from working full-
time.
    Given that, do you think one of the reasons for income 
inequality here, one of the reasons for people working part-
time, is the Earned Income Tax Credit the way it is currently 
structured that it discourages people from say getting, you 
know, $20, $25, $30,000 a year?
    Dr. Mathur. No. Absolutely not. I think all of the evidence 
that we have suggests that the EITC is actually encouraging 
labor force participation and has actually gotten people into 
the labor market.
    Now you can argue that the structure of the EITC is such 
that at some point in the phase-out region of the EITC there 
might be a disincentive effect, but there is actually no good 
research that finds that disincentive effect to actually show 
up in the data.
    So we know that it is structured in a way where you start 
losing, or the value of the benefit goes down after a certain 
point, but we do not really see that on the----
    Representative Grothman. You mean when I talk to my 
employers and they tell me that their employees are very 
sophisticated and know that they should not make more money 
because they are losing the EITC, together with their food 
stamps and everything else, you think those employers are an 
aberration and that they are not typical?
    Dr. Mathur. I am not sure of what your sample is.
    Representative Grothman. Okay. I have one more question 
here and then I have got to go and vote.
    Dr. Winship, you talked about poverty and its effect. And I 
always think there is--they are related, but poverty and 
marital structure both have an impact on children. It seems to 
me in the not-too-distant past in this country we had families 
of, you know, seven, eight, nine kids in households of, you 
know, two or three bedrooms, and they all did very well because 
those parents provided a very good example. And right now we 
sometimes have families in very, you know, sizeable low-income 
apartments but the family structure is not there.
    Could you distinguish between poverty and family structure 
in the differences we see that were mentioned by Ms. Maloney a 
second ago? I mean, what do you think is more important? 
Poverty, or family structure? Because they are related, but 
they are kind of different.
    Dr. Winship. Sure. They are related, but I think they are 
different. So it is very clearly the case that poverty rates of 
single-parent families are much, much higher than for two-
parent families. And I think we do need to do a lot better at 
encouraging more people to delay child bearing until they have 
planned for it, until it is intentional. More often than not, 
the ones that are not involved in single parenthood, I'm a 
half-time single parent myself so this is not to badmouth 
single parents, but when the rates of out-of-wedlock 
childbearing have reached as high as they have in the United 
States, I think it will be hard to do much at all about the 
poverty rate without doing much about single parenthood.
    Representative Grothman. Okay. Dr. Mathur, do you--I know 
you have written on that topic. Would you care to distinguish 
at all between poverty rates and family structure?
    Dr. Mathur. I agree with you that they are highly 
correlated and, as Dr. Winship said, we do see much higher 
rates of poverty among single mothers. We see much higher child 
poverty rates in families headed by single mothers as compared 
to families headed by married parents.
    So I think to address the problem of poverty we do need to 
talk about family structure.
    Representative Grothman. Okay, now I've got to take off. 
The record will be open for five business days for any member 
that would like to submit questions for the record. So be ready 
for those questions.
    This hearing is adjourned.
    (Whereupon, at 3:53 p.m., Wednesday, July 15, 2015, the 
hearing was adjourned.)

                       SUBMISSIONS FOR THE RECORD

    Prepared Statement of Hon. Dan Coats, Chairman, Joint Economic 
                               Committee
    The committee will come to order.
    I would like to welcome our witnesses and thank them for being here 
today to discuss the decline in the labor force participation rate, the 
underlying reasons for it, and what it means for Americans' well-being, 
job opportunities and the reward of work.
    We have witnessed the steady decline of the overall labor force 
participation rate since the early 2000s, and June's employment numbers 
revealed a 0.3 percentage point drop in labor force participation over 
the month to 62.6 percent. That's certainly a record low for this post-
recession period, and it is the lowest we have seen since the late 
1970s.
    I'd like to take a moment and point out that we have known for 
quite some time that Baby Boomers would lead to a reduction in the 
labor force participation rate. It's something that the Bureau of Labor 
Statistics, Congressional Budget Office and the Social Security 
Administration have been predicting for years. That's not really the 
concern here--in fact, Baby Boomers are retiring at a slower rate than 
previous generations. Americans age 60 and older are the only age group 
that has actually seen their labor force participation rate rise over 
the course of this recovery.
    And we've also known about the trend among younger Americans, age 
16 to 24, bypassing the labor force to focus solely on their education 
and stay in school longer. That's something that's happening in 
developed countries across the globe.


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    What I think has been really concerning us here is the effects that 
the recession had on the labor force participation rate trends, 
especially for people in their prime working years, and I think 
Americans will continue to feel those effects for some time. CBO 
estimated in its January 2015 Budget and Economic Outlook that if the 
unemployment rate returned to its December 2007 level and the labor 
force participation rate equaled its potential, there would have been 
2.75 million more workers in the fourth quarter of 2014.
    While many believe that America has entered a ``new normal'' 
characterized by lower economic growth and workforce participation, and 
subsequently require policies that lessen the negative consequences, it 
is perhaps too soon to claim that these trends are a permanent feature 
of the American economy.
    We're still facing an economy in which many people would like to 
work more hours, spells of unemployment have lengthened over time, and 
wage growth remains tepid. Job openings, which have been at record 
highs for the past two months, are staying open longer as businesses 
take more time to deliberate on potential employees, and many are 
finding themselves unable to get the right candidates for the jobs on 
hand.
    From manufacturers to grocery stores, I've heard from many Hoosier 
businesses that they have been unable to find workers to fill job 
openings--good-paying jobs with health insurance.
    I believe it is not just that Americans are having trouble finding 
work, but that there is a non-working component here as well. The 
number of people in their prime working years that say they do not want 
a job has swelled over time. And I think that would be just fine if 
they were financially secure enough to not need a regular paycheck, but 
I'm not so sure that that's true of all cases.
    We all know here that work is a sacrifice, and for many Americans 
it takes a lot of hard work to make ends meet. Yet many of the programs 
intended to help people get back on their feet have inadvertently, by 
way of their design, reduced the reward to working--making work more 
costly as Americans strive for betterment for themselves and their 
families.
    As economist Casey Mulligan testified in our previous hearing on 
the employment effects of the Affordable Care Act, ``When social 
programs pay more to people not working, the sacrifices that jobs 
require do not disappear. The commuting hassle is still there, the 
possibility for injury on the job is still there, and jobs still take 
time away from family, schooling, hobbies, and sleep. But the reward to 
working declines, because some of the money earned on the job is now 
available even when not working.''
    Raising taxes, increasing regulatory compliance, and other policy 
barriers also prove unsurprisingly effective at reducing the reward of 
work. CBO's Budget and Economic Outlook noted that increasing marginal 
personal tax rates, particularly on labor income, would ``reduce 
people's incentive to work.'' And as we know, CBO also noted that the 
new taxes and other incentives in the Affordable Care Act would reduce 
hours worked, equal to as many as two and a half million full-time-
equivalent workers.
    In a similar way, providing increasingly more subsidies that don't 
require workforce attachment to an increasingly broader share of 
eligible individuals encourages non-work. In some cases, the penalty of 
losing benefits upon employment are so great, that combined with the 
taxes expected to be paid on earnings in addition to transportation, 
child care, and other costs, they exceed more than 100 percent as an 
implicit marginal tax rate on work.
    In 1996, my colleagues and I worked with President Clinton to 
reform welfare, which included the requirement that able-bodied adults 
register for work and accept a job or go to a training program in order 
to qualify for food stamps, as they were known at the time. The 2009 
stimulus law has since modified the work requirement and eased 
eligibility rules, thereby expanding the number of new recipients. I 
believe that work requirement should be reinstated to this temporary 
lifeline.
    For Americans still in their prime-earning years, periods out of 
the labor force, underemployed, and jobless can have far-reaching 
implications for their well-being, including lower income, lower 
lifetime earnings, and less time to accumulate assets and financial 
security. It is important to ensure that government policies do not 
continue to foster economic malaise and do not discourage Americans 
from working and improving their earnings.
    Economist and former Council of Economic Advisers Chairman Glenn 
Hubbard cites a number of reasons as factoring into lower labor force 
participation, including ``simple discouragement, poor work incentives 
created by public policies, inadequate schooling and training, and a 
greater propensity to seek disability insurance.'' All of these can be 
improved with regulatory reform, welfare reform that encourages work 
and advancement, education reform and job training that includes 
emphasis on learning non-routine skills, and fundamental tax reform can 
increase incentives for work as well as drive investment and 
productivity. These are all important elements in reinvigorating the 
reward of work and renewing the American Dream.
    A dynamic labor force with the ability to adapt to the skills 
demanded in the labor market will continue to be an imperative for a 
strong economy. What remains to be seen, given these trends and lower 
labor force participation, is whether Americans can remain as 
economically mobile as they have in the past, or even improve their 
upward mobility.
    With that, I look forward to discussing these issues in more depth 
with our witnesses today.
    I now recognize Ranking Member Maloney for her opening statement.
                               S6621_____
 Prepared Statement of Hon. Carolyn B. Maloney, Ranking Member, Joint 
                           Economic Committee
    Thank you Chairman Coats for calling today's hearing.
    There seems to be a broad consensus these days that the economy is 
stronger than it has been in years.
    The evidence is undeniable that the labor market is on a much 
stronger footing. As you can see in this chart, we've had a record 64 
straight months of private-sector job growth--with businesses creating 
12.8 million jobs during this time.
    Under the leadership of President Barack Obama, the unemployment 
rate is 5.3 percent, close to current estimates of what economists call 
its ``natural rate.''
    There has also been substantial improvement in the broadest measure 
of unemployment--the U-6 rate--which includes discouraged workers not 
in the labor force as well as those working part time who would like 
full-time work.
    Let's remember how far we've come. When President Obama took over 
for George W. Bush, our economy was in a dire situation. By some 
measures, the Bush-era Great Recession was worse than the Great 
Depression.
    We were losing around 800,000 jobs a month. In the final quarter of 
2008, GDP had shrunk by a staggering 8.2 percent. During the toughest 
days, there were nearly seven job seekers for every one job. U.S. 
household wealth fell by about $13 trillion from its peak. Housing 
prices were collapsing.
    But bold action by President Obama and Democrats in Congress, as 
well as by the Federal Reserve, helped put our nation back on track.
    My Republican colleagues opposed many of the measures that helped 
reverse the economic freefall. They predicted dire consequences. But 
those predictions have been proven wrong. Now they are left with the 
weak claim that good job numbers aren't really good news.
    And that brings us to today's hearing. While it is true that 
economists are concerned about the declining labor force participation 
rate, much of this decline is structural and it long pre-dates the 
Obama administration.
    My Republican colleagues act like this is a new phenomenon. They 
gloss over the fact that the labor force participation rate fell over 
the course of the George W. Bush administration.
    And they ignore that the labor force participation rate for men has 
been falling since the early 1950s . . . as you can see in this chart . 
. .
     . . . including through the Reagan, Bush I, Clinton and Bush II 
administrations.
    Economists have long anticipated the recent decline in the labor 
force participation rate--and they predict that it will continue over 
at least the next 10 years.
    In 2006, economists at the Federal Reserve predicted that 
participation rate would fall to 63.3 percent in 2013--and that's 
exactly what happened.
    The decline in labor force participation is largely driven by 
demographics--principally, the retirement of the baby boomer 
generation.
    The first baby boomers began to retire in 2008, when they turned 62 
and became eligible for Social Security early retirement benefits. And 
they continue to retire at a rate of about 4 million a year--or more 
than 10,000 every day.
    In fact, the working lives of the baby boomers roughly track the 
rise and fall of the labor force participation rate.
    This chart shows the rise and fall in the percentage of Americans 
in their prime working years (25-54).
    The Council of Economic Advisers estimated that HALF of the 3.1 
percentage point decline in labor force participation from fourth 
quarter of 2007 to second quarter of 2014 was due to the population 
aging. Other economists have reached similar conclusions.
    Let's be clear--the fact that older Americans are able to retire is 
a good thing. But it also lowers the labor force participation rate. 
This is not the fault of Barack Obama or any other president.
    There is a second important factor that helps to explain the 
decline in the overall labor force participation rate--the declining 
number of young people in the work force.
    But young people are working somewhat less for a perfectly good 
reason--they are going to college!
    In 1970, less than a quarter of 20 to 24 year olds went to college. 
By 2013, that number had climbed to nearly half (46.4 percent) as you 
can see in this chart.
    When young people choose to get an education instead of going 
directly to work, it reduces the labor force participation rate in the 
short term. However, in the future they likely will make more money, 
contribute more to the economy and have higher labor force 
participation rates.
    Let me say something that we should all agree on . . .
     . . . we need to build an economy that creates enough good-paying 
jobs to keep more men and women in the labor force.
    There are five things we can do right now toward that end.
    First, we should invest in infrastructure to rebuild our roads and 
bridges, create good-paying jobs and improve U.S. competitiveness.
    Second, we need family-friendly workplace policies that will boost 
employee retention, lift worker morale and can increase participation 
in the workforce. When policymakers make it easier to balance work and 
family, more people will be able to enter and remain in the labor 
force, especially women.
    Third, we should expand the Earned Income Tax Credit (EITC), an 
initiative that has proven to boost labor force participation among 
low-income workers.
    Fourth, we should pass a second-earner tax credit, like the one 
President Obama has proposed. This would help 24 million families where 
both spouses work to offset the costs of commuting and child care, 
making it more financially attractive for the second earner to remain 
in the labor force.
    Fifth, we should pass immigration reform. According to CBO, the 
bipartisan immigration bill passed by the Senate in 2013 would have 
increased the labor force by about 6 million workers in 2023.
    I hope that today we can have an even-handed discussion of labor 
force participation and related issues. I look forward to our 
witnesses' testimony.


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