Barriers to Participation in the Labor Force: A Primer

Over the last few decades, vulnerable groupsThe St. Louis Fed’s Institute for Economic Equity defines “vulnerable” as being more sensitive to economic downturns and shocks, such as the COVID-19 pandemic. See this blog post for more details. have experienced the U.S. economy differently, both in terms of labor force attachment and wage growth. Even during the current economic expansion, with its very “tight” labor market, they continue to face challenges to joining the labor force. They face systemic challenges to participation that are correlated with nonproductive attributes, including race, ethnicity, gender, age and geography, among others.

In this essay, we will provide an overview of the major structural barriers and their roles in generating persistent economic vulnerability.

What Is a Structural Barrier to Work?

Structural barriers to labor force participation are features that exist regardless of whether the economy is expanding, slowing down or even in recession. They create additional costs that individuals must consider when making decisions (e.g., searching for a job). Structural barriers make it more difficult for people to search for a job, receive and accept an offer, and hold a job, regardless of their ability.

Substantive literature using resume-based experiments shows that employers are less likely to contact Black and Latino applicants based on their names. Such discrimination is an example of a structural barrier. In the past few decades, this type of discrimination has been declining for Latino workers, but it has been persistent for Black workers. Discrimination during the hiring process lengthens job searches and even reduces or stops people from looking for employment.

Access to child care is another prominent structural barrier that doesn’t have anything to do with race or gender directly, but that impacts vulnerable groups differently. A disproportionate number of women are not in the W-2 or 1099 labor market because they don’t have access to affordable, good-quality child care. It should also be noted that Black and Latina women saw higher job losses during the COVID-19 pandemic, and historically they have less access to high-quality and affordable child care. Without proper child care, women have been slow to return to work, regardless of high levels of job vacancies.

Access to transportation has been, and continues to be, a major hurdle to labor force participation. A recent study found that commute distances have been increasing over the last two decades. However, since lower-income households are less likely to own a vehicle, access to transportation becomes a relatively greater barrier. It can be costly and time-consuming to get to a job without good access to transportation.

People in low- and moderate-income (LMI) communities often face multiple barriers at once. A study by the Kansas City Fed showed that across time (2009, 2012, 2017), labor force participation was lower in LMI communities than in non-LMI communities by 6.5 to 7.6 percentage points.

Structural Barriers at Multiple Levels

People often face multiple barriers, and every additional barrier can make getting or keeping a job much more difficult. One way to organize structural barriers to labor force participation is to understand how they exist at multiple levels. Although the figure below is not meant to present an exhaustive list, it classifies some common barriers at micro, meso and macro levels. Organizing barriers in this way provides a contextual understanding of challenges people face.

Barriers to Labor Force Attachment

Micro-Level Barriers

These barriers exist at an individual and family level, but underlying norms and the built environment in which we live make them structural.“Built environment” refers to the man-made structures, utilities, interventions, etc. that support human activity. Take, for example, disability status. People with a disability who are out of the U.S. labor force or unemployed represent a pool of up to 24.8 million potential workers from which employers could draw. Yet, those with a disability who want to work face a variety of structural and attitudinal barriers to gainful employment. However, the increased prevalence of remote work and assistive technologies can reduce some of these barriers.

Meso-Level Barriers

These barriers exist at a neighborhood or a city or county level. Take, for instance, access to high-quality K-12 education. Research suggests that students from lower-income families and communities tend to do poorly in school (PDF). Although these students might face additional challenges, the schools they attend are also under-resourced and are less likely to have highly trained teachers. Students may attend school, but their academic achievement is impeded, which puts them at a disadvantage when looking for jobs or further education.

Macro-Level Barriers

These barriers exist at the macroeconomic and policy level. The current situation of low unemployment and a high number of job vacancies creates an environment beneficial to people looking for work. However, one could argue that people who currently are not in the labor force have the fewest incentives to join it and face the most challenges in doing so. For example, consider people facing benefits cliffs from income-based public assistance. Joining the workforce or getting a job that pays more than the income threshold can mean losing these public benefits, that is, falling off the benefits cliff. If total household income decreases through a loss of public benefits, people may choose to work fewer hours or to not enter the workforce.

The Importance of Addressing Barriers

Economic growth can occur through increased productivity and/or increased participation in the economy. Structural barriers impede people from participating in the economy to the best of their abilities and could, in turn, adversely impact economic growth. These barriers create inefficiencies that harm not only the job seeker but also the employer. Especially when the labor market is tight and employers are having a tough time finding workers, a deeper labor pool could reduce the cost of hiring.

These inefficiencies, over the longer run, could also adversely impact the community and regional economy. When people are not working, or not earning at their potential, it reduces their purchasing power, which means there is less money flowing into the economy. For example, in Missouri, if the racial gap in median household income were closed, it could potentially add $8.5 billion annually to the disposable income of the state’s economy. Reducing barriers for those who want to work will help people and the economy more fully reach their potential, especially when labor force attachment has been decreasing over the last two decades.

Notes

1. The St. Louis Fed’s Institute for Economic Equity defines “vulnerable” as being more sensitive to economic downturns and shocks, such as the COVID-19 pandemic. See this blog post for more details.
2. “Built environment” refers to the man-made structures, utilities, interventions, etc. that support human activity.