On August 30, Puerto Rico Governor Pedro Pierluisi announced the establishment of a task force to address Puerto Rico’s low labor force participation.
Current labor force participation levels
Although Puerto Rico’s unemployment rate is now at a record low of 6.2%, the U.S. territory’s labor participation rate is just 43.4%. This refers to the percentage of the population age 16 or above either working or actively looking for work. The U.S. as a whole has a labor participation rate of 63.2%.
Puerto Rico’s labor participation was just over 49% in 2007 and has been falling since. This means that 1.5 million adults are not participating in the workforce. Puerto Rico’s labor participation rate is lower than that of any state.
Liberty Street Economics attributes this low participation rate to an aging population. On the other hand, the Heritage Foundation points to restrictive labor regulations, including mandatory Christmas bonuses and rules that make it difficult to fire workers. The National Bureau of Economic Research offers the “rich Uncle (Sam) hypothesis,” suggesting that tax loopholes creating divergence between the GDP and the GNP, along with the large informal employment sector and the ease of moving to the mainland for work at higher wages, creates an environment in which formal employment is less appealing than it usually would be.
The task force
The task force, which will be led by Labor Secretary Gabriel Maldonado González, plans to identify obstacles to employment, to develop job training and placement programs, and to create economic development initiatives.
The Workforce Innovation Opportunity Act state portal for Puerto Rico identifies several barriers to employment on the Island, including a higher level of disabilities than found in the states, poverty, and the presence of young children needing care in the household – reflecting years of “brain drain” migration as Puerto Ricans have left the U.S. territory in favor of states.
Governor Pierluisi has acknowledged that working within the formal employment system can cause people to lose their government benefits such as nutrition assistance. A transition from social assistance programs to a more self-sufficient way of life is a key component of the new task force’s mission. The task force is encouraged to find ways for people to work without losing benefits.
The task force will present its recommendations by December 31, 2023.
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