Why is the adult employment rate in the United Kingdom at around 74% so much higher than it is here in the United States (75%)? I’m serious. Why?
Why is the adult employment rate in the United Kingdom at around 74% so much higher than it is here in the United States (75%)? I’m serious. Why?
According to FRED, the rates are 74% in the UK and 70.5% in the US currently, and it looks like historically they were almost identical from 2003-2007 but diverged with the 2008-2009 recession and stayed diverged.
https://fred.stlouisfed.org/graph/?g=k2sM
At a guess, this probably comes from differences in welfare/unemployment systems in the two countries. In particular, since the 1995 welfare reform, the main form of long-term cash assistance in the US has been Social Security Disability Insurance. So for people who lost their jobs during the recession and couldn’t find a new job, there was a big incentive to try to apply for SSDI if they had a chance of qualifying. And many people tried and succeeded, leading to them leaving the work force permanently since they’d have to give up their disability benefits to re-enter the labor force. I’m not familiar with the situation in the UK, but I suspect it’s different.
Secondarily, Social Security retirement benefits can be claimed early. So a 60-year-old who got laid off in 2008 might decide that rather than trying to find a job in a crappy economy for a couple years, they’ll live off savings or their spouse’s income and then start claiming Social Security at age 62. The equivalent program in the UK (State Pensions) can’t be claimed until age 67, so a hypothetical unemployed 60-year-old in Britain is much more likely to keep looking for work.
I find this a plausible argument:
https://medium.com/bonothesauro/why-has-the-us-fallen-behind-the-uk-in-labor-force-participation-3775b29b625
I like that analysis a lot, Ben. Thanks. However, I think, as alluded to by Eric, above, the definition of “disability” is a large part of the explanation. In the U. S. SSDI has become the unemployment insurance of last resort or, said another way, a significant number of people who’d actually prefer to work have enrolled in disability due to lack of job availability and inadequate wages. I think that’s particularly true of women.