Friday’s jobs report for July revealed another good month for the American economy, and the unemployment rate ticked down to 3.9% from 4%. But many potential workers are still on the sidelines, and Congress has an opening to help.
Job growth at 157,000 in July was less robust than expected. But the Bureau of Labor Statistics revised the past two months upward by 59,000 to 248,000 jobs in June and 268,000 in May. This puts the average for the last 12 months at 200,000, higher than the 185,000 in the previous 12 months, a rare acceleration this deep in the business cycle. Credit goes to tax reform and deregulation that are giving the expansion a second wind.
Yet evenwith this growth, 96,000 more people were out of the labor force in July, and that’s up nearly a million from July 2017. Even with the pull of a strong economy and more than six million available job openings, the 62.9% labor force participation rate is the same as a year ago.
Some 17.9 million prime-age workers who aren’t disabled aren’t in the labor force, according to data from the White House’s Council of Economic Advisers. About 1.6 million cited going to school as the reason, and another 8.4 million were caregivers. Roughly 2.9 million reported illness and 1.2 million retired early. But 2.9 million have worked in the previous year, and about 400,000 say they couldn’t find work. These workers in particular should be the easiest to move back into jobs.
There are many reasons people aren’t working, including the opioid plague. But there are also government incentives not to work. These columns have noted that some of the highest marginal tax rates hit Americans who work more hours but lose government benefits as their incomes rise. White House economists estimate that a person can lose up to 36 cents in food-stamp benefits for every marginal dollar earned from labor.
Millions of Americans receiving government assistance also don’t work at all. About two-thirds of adult food-stamp recipients are not disabled or seniors, according to government survey data. Yet more than 50% of this group reported working zero hours a week while receiving benefits. The same holds for Medicaid.
Food stamps have a work requirement on paper but states have waived it in part or entirely, so the House included in its farm bill a provision that requires 20 hours a week of work or training or volunteering. The last two categories ensure that food-stamp recipients aren’t punished if they can’t find jobs. The measure excuses anyone caring for a young child or going to school, among other dispensations.
Such sensible changes were too spicy for the Senate, which passed its farm bill without the reforms. But this week President Trump tweeted his support for including the work requirement in the House-Senate conference. Alas, Mr. Trump’s tariff war isn’t helping the politics. Farm state Senators are claiming that trade damage means finishing the bill is especially urgent, so there’s no time for debate over food stamps.
President Trump can take credit for the stronger economy. But the U.S. needs more productive workers to keep growing at a 3% clip, and welfare reform is one way to coax more people back to work.
—The Wall Street Journal