Fault lies mostly with Congress.
The "labor force participation rate" — the share of the population that is working or looking for work — has dropped dramatically in the weak labor market of the Great Recession and its aftermath.
Some of the drop has nothing to do with weak job opportunities; for example, during this period the Baby Boomers started hitting retirement age. But most of it does. In November 2007, one month before the recession officially began, the Bureau of Labor Statistics published labor force participation projections. The analysts did not know the recession was about to hit, but they could see coming demographic trends, so their projections capture what labor force participation would likely be today if the recession hadn't happened.
According to their projections, the current labor force participation rate should be 65.2%, but instead it is 62.8%. That difference translates into 6 million "missing workers," people who aren't working or looking for work but who would be if the recession and the weak recovery hadn't wreaked havoc on job opportunities. If these workers were in the labor market looking for work, the unemployment rate would be 9.7% instead of 6.3%.
Some claim that these missing workers took up permanent disability benefits. This is mostly wrong. New disability beneficiaries explain at most a tiny share of the rise in missing workers. Many people with serious, work-limiting disabilities work, but if they are laid off during a time of scarce job opportunities, they may have no choice but to take up disability.
Stephen Goss, chief actuary of the Social Security Administration, estimates that the recession increased disability beneficiaries by 5%, which translates into 420,000 people — a small fraction of the 6 million missing workers.
This means there are millions of would-be workers who are not on disability. They have been sidelined because of the weak labor market and will likely be pulled in when job opportunities strengthen. In the meantime, they represent an enormous loss of human potential, the fault for which lies mostly with members of Congress who have throttled the recovery in recent years with unnecessary fiscal austerity.
Heidi Shierholz is an economist with the Economic Policy Institute, a progressive think tank in Washington, D.C.