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WonkFeud Part 2: The labor force participation debate gets real

On Monday we began our first WonkFeud, in which our own Jim Tankersley and the Wall Street Journal's Ben Casselman went at each other over labor force participation. Now, it's Round 2. Catch up with Casselman's original article that started it all here, Jim's initial parry here, and Casselman's counter-jab here.

Ben Casselman has all but conceded our WonkFeud to me -- “As it happens, I agree with most of this” – but he raises one objection that must be addressed.

“I do take issue with one of Mr. Tankersley’s points,” he writes. (And by the way, I do enjoy that his paper’s style requires he call me “Mr. Tankersley,” while I am free to call him Ben, or Cas, or the Cassinator.) Continues the Cassinator: “He argues that if the previous upward trend in participation had continued, more than 90% of the adult population would now be working. That’s true, but it’s also true that if I’d kept growing at the rate I did in high school, I’d now be close to 20 feet tall.”

I am terrified of the prospect of 20-foot economics reporters, but I see no reason why the U.S. labor force participation rate for prime-age workers could not have kept rising since 1997, if the economy had been healthy enough to encourage it. Perhaps the growth rate  might have slowed; perhaps it would have topped out by now; either way, Casselman offers no evidence why the current rate is the correct one, or the desirable one.

We see that the rate grew for 50 years, peaked in the late 1990s, and began to fall in the early 2000s. It has now fallen to a level not seen since 1985, a time so long ago that it was six years before the famed feud between MC Hammer and Michael Jackson.

Participation among prime-age adults with less than a high school diploma is plummeting, Robert Moffitt, an economist at Johns Hopkins University who specializes in labor force issues, told me in an interview this month. Whether those would-be workers will return when the recovery finally picks up steam “is the million-dollar question,” Moffitt said.

It's still possible  that slow growth and falling labor force participation are feeding on each other. As fewer Americans work, the economy’s capacity to grow diminishes; as long as growth is sluggish, fewer Americans might feel hopeful enough to even look for work. The Cassinator says this was bound to happen, and I am inclined to agree*: “To a perhaps underappreciated degree, the nation's postwar growth was fueled by an unprecedented surge of workers into the labor force,” he writes. “But that surge was always bound to come to an end.”

This is exactly why it was wrong in the first place to point to demographic change as the more important component of the decline in labor force participation today. It has never been a question that America’s demographics would shift as the baby boomers began to retire; we’ve seen it coming for decades. What is new, surprising, alarming and often overlooked in the labor force today is the exodus of workers in their prime -- and all the growth opportunities they’ve taken with them.

(Drops mic.)

*Minor areas of agreement do not imply concession of WonkFeud. But they do imply a frustration with the lack of economic foresight demonstrated by baby boomers.

Update: And here is Casselman's response.