The Big but Hidden U.S.

Jobs
Problem
Labor-force participation remains alarmingly low.
The British could offer tips on putting people to
work.
By ROBERT DOAR
Jan. 11, 2016

While the Labor Department reported 292,000 net new jobs in December,
the U.S. labor-force participation rate, 62.6%, has remained at near record
lows after more than five years of steady decline. It increased a bare tenth of
a percent over November. Meanwhile, labor-force participation in Great
Britain stayed flat through the downturn; and for 25 to 54 year olds, it
increased 2.2 percentage points from 2000 to 2014. Over the same period in
the U.S., the labor-force participation from ages 25 to 54 dropped 3.1
percentage points.
Running New York Citys welfare program for six years in the Bloomberg
administration until 2013 taught me that employment is central to the wellbeing of families and the economy. The fact that so few Americans are
holding or actively seeking a job is a serious problem, especially for those at
the bottom.
I am not an economist, but one likely reason for the dismal labor-force
participation is that many U.S. assistance programs act more like work
replacements than work supports. The U.K., by contrast, has been more
active in pushing recipients toward employment.
In a study published last month, University of Chicago economist Casey
Mulligan concludes that in response to the recession, several U.S. safety-net
programs changed in ways that discouraged employment. Unemployment
insurance, for example, was made more generous in multiple ways. Eligibility
rules for food stamps were reduced, waivers from work requirements were
granted, and the monthly benefit amount was increased.
The U.K.s fiscal stimulus took a very different path. Increases to benefit
programs were smaller, Mr. Mulligan notes, and largely involved cutting tax
rates on income and consumption. To encourage more low-income
individuals to work, Work and Pensions Secretary Iain Duncan Smith
reformed the disability program to make more accurate and frequent
assessments of recipients ability to work, and imposed benefit caps. He has

also begun to roll out the Universal Credit system to help the unemployed
find work faster, stay in their jobs longer and earn more.
The American stimulus reduced average incentives to be employed during
the recession, Mr. Mulligan writes, whereas the British stimulus did the
opposite. His research suggests that as of 2013 incentives to work in the
U.S. still remained below what they were in 2007.
Mr. Mulligan is not alone. President Obamas Council of Economic Advisers
acknowledged in its 2015 Economic Report of the President that among the
factors fueling the U.K.-U.S. divergence were British policy changes that
introduced more stringent job-search requirements for some welfare
recipients.
Mark Carney, the governor of the Bank of England, in a September
2014 speech cited reforms to Britains welfare system as a possible
explanation for why the U.K. labor market is outperforming Americas and
Europes. Increasing employment is vital for the flourishing of American
families. Only 3% of working-age adults who work full time, year-round, are
in poverty. To help low-income Americans move up, the U.S. should take a
page from the British playbook by sending strong messages about the
importance of work.
Consider the 45 million recipients of food stamps. While touring the country
with the National Commission on Hunger, I often heard from recipients that
the Supplemental Nutrition Assistance Program was good at providing
electronic-benefit transfer cards, but not so effective at helping them get a
job. This fall the Obama administration launched a SNAP Employment and
Training Center of Excellence, dedicated to helping food-stamp recipients
obtain jobs. This may be an indication that the White House has awakened to
the programs shortcomings.
A clear expectation of having to work is the most effective way to move
recipients of public assistance into employment. States should receive
bonuses for finding work for their food-stamp recipients and refer all ablebodied adults applying for benefits to an employment program. The states
also should establish performance contracts based on job placements for all
government contractors who provide job-placement services.
Over the past decade, some U.S. benefits have become easier to obtain
without having to comply with paperwork, employment or training
requirements. This may have reduced what advocates for these changes call
barriers to assistance. But the British experience shows that proper
reforms of the safety net can help individuals return to workwhich is crucial
for lifting them and their families out of poverty.

Mr. Doar, a fellow at the American Enterprise Institute, was the commissioner
of the New York City Human Resources Administration, 2007-13.