The Rise of In-and-Outs: Declining Labor Force Participation of Prime Age Men

New paper finds that the decline in LFP in prime age men is in large part (20-40%) from "in and out" men who pop in and out of the labor force for periods of two years, as opposed to dropouts. these men are largely capable in that there absence from labor force doesn't effect their lifetime earnings, implies it's largely a function of personal preference, "....While out of the labor force, in-and-outs replace time spent working with leisure activities, primarily watching television. In-and-outs do not spend much more time on child care, care for adults, educational activities, or job search during these breaks...."

John Coglianese, "The Rise of In-and-Outs: Declining Labor Force Participation of Prime Age Men," American Economic Association, January 2019, https://www.aeaweb.org/conference/2019/preliminary/608

".....This paper documents that much of the decline in labor force participation of U.S. prime age men comes from “in-and-outs”—who I define as men who temporarily leave the labor force. Individuals moving in and out of the labor force have been an understudied margin of labor supplybut account for 20-40% of the decline in participation between 1984 and 2011. In-and-outs are distinct from unemployed individuals, experiencing no loss of future income as a result of their time out of the labor force, and represent a distinct margin of labor supply from long-term labor force dropouts. Examining explanations for the rise of in-and-outs,I find little evidence to suggest that changes in labor demand are responsible.... In 1960, more than 97% of American men between the ages of 25 and 54 were either employed or actively looking for work. By 2015, this rate had fallen to 88%, representing nearly 5.5 million fewer prime age workers in the labor force at any point in time.... document that participation has changed along an understudied margin of labor supply. I find that “in-and-outs”—men who temporarily leave the labor force—represent a growing fraction of prime age men across multiple data sources and are responsible for 20-40% of the decline in the participation rate between 1984 and 2011. In-and-outs take short, infrequent breaks out of the labor force in between jobs, but they are otherwise continuously attached to the labor force. Leading explanations for the growing share of permanent labor force dropouts, such as disability, do not apply to in-and-outs. Additionally, evidence indicates that the rise of in-and-outs does not result from a decline in labor demand for prime age men. Together, these facts paint a different picture of declining labor supply among prime age men than documented previously..... show that the rise of in-and-outs is a robust phenomenon observed over the last several decades in a number of different longitudinal data sources. In the Survey of Income and Program Participation (SIPP), the share of men who are out of the labor force in any given month rose 5.3 p.p. from 1984 to 2011, with between 1.3 and 2.0 p.p. of this increase coming from nonparticipation spells lasting less than two years. Similar increases in temporary nonparticipation are evident in other longitudinal datasets, including administrative earnings records. Additionally, retrospective data sources inaccurately estimate the number of in-and-outs, as measurement error in retrospective collection is growing over time, possibly due to recall problems or increased rounding by respondents. After returning to the labor force, most in-and-outs are highly attached to the workforce over the subsequent decade.... The rise of in-and-outs appears to be a distinct margin of labor supply from changes in permanent dropouts. The two groups cite different reasons for leaving the labor force, report different qualities of life, and show up in different regions. While some in-andouts could turn into dropouts, the distinctions between these two groups make it more natural to treat them as separate components of the participation decline, with separate explanations, rather than intertwined aspects of the same phenomenon. Additionally, some of the most common explanations that have been put forward for the growth of permanent dropouts, such as disability insurance or incarceration, cannot explain the rise of in-and-outs. In-and-outs do not represent men switching between market-sector work and home production. While out of the labor force, in-and-outs replace time spent working with leisure activities, primarily watching television. In-and-outs do not spend much more time on child care, care for adults, educational activities, or job search during these breaks..... I find that changes in men’s market opportunities can explain little of the rise of in-and-outs.... The rise of in-and-outs forms a different picture of declining labor supply than the common view of men permanently withdrawn from the labor force. In-and-outs are highly attached to the labor force, work typical jobs, and are only notable in that they take brief breaks out of the labor force. I have presented evidence that the increasing prevalence of these breaks does not reflect a change in labor demand. Instead, the rise of in-and-outs may be due to changes in the desired amount of labor supply among prime age men in the US. Since in-and-outs’ breaks are typically short and infrequent, as well as incurring no permanent costs, the rise of in-and-outs likely has had a minimal effect on the inequality of lifetime incomes among men. In contrast, the growth of permanent dropouts over the last several decades, responsible for the other two-thirds of the decline in participation since 1977, likely raised lifetime income inequality substantially. Dropouts not only forgo years of income while out of the labor force but may also experience lower wages if they return to the labor force, compounding the increase in inequality. The differences in consequences between changes along these two margins illustrates the importance of separating in-and-outs from dropouts when studying changes in labor supply....."