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Where Are the Workforce Dropouts?

Approximately 3 million people who left the workforce during the COVID-19 pandemic due to physical impairments or worries about illness have no plans to return. It’s a trend that could have long-term consequences on an already tight labor force, according to research cited by The Wall Street Journal (subscription).

What’s happening: These “workforce dropouts say they don’t plan to return to pre-Covid activities—whether that includes going to work, shopping in person or dining out—even after the pandemic ends, according to a monthly survey conducted over the past year by a team of researchers,” according to the Journal.

  • “The workforce dropouts tend to be women, lack a college degree and have worked in low-paying fields.”

Why it matters: If the trend does depress the job market for years, “the implications for the world’s largest economy and the Federal Reserve are substantial,” according to the Journal.

  • “A sharp drop in the labor force at the pandemic’s start led to shortages of workers and products that have frustrated households, restrained economic growth and helped push inflation to a 40-year high.”
  • The U.S. is already “missing” about 3.5 million workers owing to COVID-19, according to the researchers.

The Federal Reserve is banking on an increase in labor-force participation, as it tries to bring inflation back to 2% over the next two years without highly aggressive rate increases.

In related news: Two new studies from the National Bureau of Economic Research show the importance of child care and in-person schooling to labor-force participation by parents.

  • One study found “that parents, especially those without college degrees, responded to school closures by reducing their hours or shifting from full- to part-time work.”
  • The second study found that “[m]others with and without college degrees showed comparable employment gains after schools reopened.”

What we’re saying: “Manufacturers that offer child care and flexible scheduling increase their chances of finding and keeping talent,” said MI President Carolyn Lee. “In addition, the above-mentioned studies and trends underscore the need for efforts such as Creators Wanted, the industry’s largest campaign to build the workforce of tomorrow. Manufacturing jobs are attainable with short courses of skills training, so they can accommodate those who may have previously been in low-paying fields.” 

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