I’m not really sure this is supported by data. I do agree that the labor market is tight; otoh, there does not seem to be evidence that a significant contributing factor to declining labor participation is due to government assistance.
Pew Research in 2013 suggested:
These researchers acknowledge that scholars don’t yet know all of the causes of these changes. They suggest globalization, the diminishing power of labor unions and the dizzying pace of technological change all may pose barriers to stable employment and raise frustration levels, particularly among men. Other scholars have cited institutional changes that have made it easier for mothers to work. Changes in family structure, immigration and the aging of the Baby Boom generation also may contribute to these trends. Add to that the simple fact that men—particularly those with a working wife—don’t need to work as long or as hard these days to support a family, or to even work at all.
To this long and growing list Autor and Wasserman add another intriguing possibility: Absentee dads.
Sifting through Census data, they find a significant share of this shift in employment outcomes is largely occurring in one group: men born into single-parent households, most of which are headed by women. As a group, these boys are significantly less likely to graduate from high school or go to college than other children, they found.
While this paper released by the Federal Reserve Board in 2014 on this very topic concluded
Combining the results from these different approaches, our overall assessment is that much – but not all – of the decline in the labor force participation rate since 2007 is structural in nature. As a result, while policymakers can view some of the current low level of the participation rate as indicative of labor market slack beyond that indicated by the unemployment rate alone, they should not expect the participation rate to show a substantial increase from current levels as labor market conditions continue to improve. Indeed, as we show in the final section of the paper, projections from our model point to further declines in the trend participation rate over the next decade or so.
So without more investment in this particular topic i don’t with a cursory glance see much support from academic literature that labor force participation as the problem exists today is correlated with government assistance. This is not to say it isn’t plausible, but (at least my own position right now) would be that it’s conjectural and not supported by the data.
[edit a little bit more, which also supports my previous conjecture i noted above that it has to do with globalization and technology winnowing out middle level, semi-skilled or lower skilled jobs.]
The role of polarization in the secular decline in participation for less-educated adults
Returning to the top panel of figure 4, prime age males without a college degree have experienced a long secular decline in their participation rates, joined by prime age women without a college degree beginning in the early 2000s. These declines have been the subject of a considerable literature reaching back to the 1980s. The early literature, which focused on prime age men, identified declining labor market opportunities for low-skilled workers, manifested in stagnant real wage growth, as the likely explanation (e.g. Juhn, 1992). However, since the 1990s, changes in labor demand have not been characterized by a monotonic increase in the demand for skilled workers, but rather by a decline in labor demand for occupations that have tended to be “middle-paying” or middle-skill jobs, and a concurrent increase in the both the share employed in higher-paying jobs (for better educated persons) and the share employed in lower- paying jobs (for less educated persons), e.g. Autor 2010.26 Can this polarization explain the decline in labor force participation among these workers over the past decade or two?
Polarization in labor demand, driven by exogenous technological changes and globalization, seems at least a plausible candidate explanation for some of the secular decline in participation among less-educated individuals. The idea is that polarization, while increasing demand for better-educated workers, displaces some less-educated (non-college) workers who were employed in middle-type jobs. Of these, some are able to transition to high-type jobs, some transition into the lower-paying service sector (perhaps displacing lower-skilled workers), and some may temporarily or permanently drop out of the labor force, as the decline in demand for their labor pushes their offer wages below their reservation level.27 Labor force withdrawal is likely to be most acute for less-educated adults, since they are most likely to have been employed in middle-type or lower-type jobs.28
