Besides presence of Medicaid expansion/health insurance subsidies and unemployment insurance benefit amounts, other factors also explain why Louisiana has a low unemployment rate yet low labor force participation rate.
As previously noted, payoffs from those two benefits can convey a significant sum to families to discourage work; in Louisiana, maximum unemployment benefits plus half eligible subsidies for a two-parent family of four can amount to more than the annual salary of a retail associate or firefighter. However, a couple of other instances of policy-making in the state also contribute to discouraging work.
One comes from its embrace, eschewed by a majority of states, of a state-level earned income tax credit. Although lauded even by some conservative policy-makers, the data show that while it rewards for work, it doesn’t encourage people to go to work (as well as for those who work discourages them from working more or more productively). Thus, if a family has one able-bodied adult working, the EITC may discourage others from doing so because additional income can reduce or even disqualify reception of it. The bright side is Louisiana’s low rate (temporarily 5.25 percent but on track soon to revert to its normal level one-third lower) minimizes the deleterious impact.
Another is Social Security Disability Insurance benefits. Designed to aid workers who suffer from some kind of disability that limits their ability to work, at the same time scholars note it helps keep many able-bodied adults with limited earning potential out of the labor market. Federal guidelines determine the benefit amount, but federal examiners within the state determine who qualifies.
During the Democrat Pres. Barack Obama Administration, proportions of those qualifying and attempting to qualify soared, which tempered during the Republican Pres. Donald Trump term. While the economic malaise during Obama’s years followed by the sharp recovery experienced under policies enacted in the Trump era has something to do with this, the magnitude of the changes suggest a greater tendency to encourage and approve of these transfer payments (which contributes to the escalating narrowing of the trust fund’s solvency window) than previously.
And as it turns out, Louisiana examiners approve of applications at higher levels than nationally, and has the seventh-highest proportion of population on SSDI. While it possible to work while receiving SSDI payments, its reception also is a disincentive to work, and there’s no statistical reason why Louisianans should experience disability at a higher rate than other states.
There may be other fiscal policy decisions – which researchers have identified as most to blame for the declining participation rate that is hollowing out most worryingly among men in the prime working age of 25-54 – such as disproportionately generous state Wuhan coronavirus pandemic policies that resulted in a rapid increase in household savings that could account for the anomalous outcome. Those reasons identified above certainly did, and their modification or reversal where state government can would ameliorate a coming fiscal and economic crisis of greater idleness exactly at the worst time with a disproportionately aging population looming.
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