Here is a graph showing the evolution of the share of those who have a job, David H. Montgomery at the Minneapolis Fed, in “Who Doesn’t Work?” Understanding the Aging Workforce in the United States » (February 27, 2023).
Age groups 16-19 and 20-24 show the largest decline in population share from March 2000 to March 2022. This is largely due to the growing number of these age groups spending more time at school; moreover, they became less likely to work while in school part-time or full-time.
Age groups over 55 all have a growing share of jobs. This change is partly an improvement in the health of older Americans, partly incentives built into programs like Social Security to retire later, and a desire (especially among educated workers) to endure the trade-off of a later retirement in exchange for more savings before retirement.
The mystery is the declining share of jobs among what government statisticians call “prime-age” workers, aged 25 to 54. Montgomery offers no reasons for the decline in employment in this group, which are frankly mysterious. This is not a short-term phenomenon related to the pandemic. It is mainly explained by a fall in the occupation of jobs among men. The decline in prime-age male employment has been going on for decades, so it seems unlikely that it can be explained by any particular law or rule change, or by the party politics in power.
Plausible theories suggest that during a period of rising wage inequality, workers who feel stuck at the bottom of the wage distribution may drop out of formal work, even though they are in many cases working outside the books. Moreover, the the proportion of adult men who are uncoupled (ie not married or cohabiting) is high, and single men are increasingly likely to live in their parents’ home. The disconnection of these prime-age adults from the labor force represents a loss of economic output, but certainly more significant, it represents an important group – many of whom have not left the labor force, but rather have been stuck in low-paying jobs – living out their prime years in frustration and resignation to their earlier aspirations.