New Report Shows Growth of the Welfare State Has Fueled Long-Term Declines in the Labor Force

The study notes that “only 12 percent of inactive, prime-age, able-bodied men said they wanted a job or were open to work.”

Source: New Report Shows Growth of the Welfare State Has Fueled Long-Term Declines in the Labor Force - Foundation for Economic Education

Regardless of how you might feel about welfare generally, I think most people would agree that the goal of welfare is to help those in temporary need or those that are unable to help themselves. Data indicates that instead, the government is essentially paying people not to work. While this has been a long term trend for many years, it is even more noticeable since the government has massively increased welfare as a result of their COVID policies.

One common argument is that the minimum wage is not high enough. I would argue that generally speaking, the market should set wages and that interference in that process can only make things worse in the long run. If the world's economic problems could be solved by increasing minimum wage then we could just pay everyone a million dollars an hour and be done with it. For those that think minimum wage should be higher, should it be the same for a kid working part time for some extra cash as it is for a single mom working full time trying to make ends meet? How do you decide what the minimum wage should be? More importantly, how do you keep an increased minimum wage from causing prices to go up and/or employment levels to go down (which defeats the purpose)? People working at McDonald's demanding more than $15 per hour have to realize that they are demanding themselves out of a job. More expensive human labor will be replaced by machines and that is a process that has already started (e.g. automated kiosks for ordering food are common now).

So what IS the solution? I don't think you can treat what I would call introductory, low skill jobs as a career. You have to be able to leverage that experience into better jobs and pursue education and training in more in-demand areas. That isn't always easy but simply increasing the minimum wage will ultimately be counterproductive and is not a better solution. What good is raising the minimum wage if your purchasing power declines because of higher prices? In Florida, the minimum wage is set to hit $15 in 2026, rising $1 a year until then. Currently, as of September 30th, the minimum wage is $10/hr. In my area, it's hard to find a job that pays less than $11/hr. and there are lots of them. For the moment, there seems to be an acute labor shortage in part because people are able to make more money by not working. On the other hand, businesses seem to be unwilling or unable to go above about $11/hr currently. Prices are already on the rise and there is only so much a person is willing to pay for a cheeseburger.

If the government were smart enough to "manage" the economy then the economy would be in excellent shape. Free markets aren't perfect either but provided there is robust competition, they are far better than anything the government can offer and will bring prosperity to the most people.