Why so many Americans aren't looking for work

Last Updated Sep 4, 2015 8:35 AM EDT

With the August jobs report out today, and as the Federal Reserve gets ready to meet in two weeks to consider what to do with interest rates, two interrelated mysteries are stumping Fed policymakers: Why does the U.S. recovery from the Great Recession continue to be so anemic, and why do tens of millions of American workers remain on the sidelines?

Despite all the job gains of recent years, the national labor force participation rate in August remained stuck near historic lows at 62.6 percent, leaving the economy performing nowhere near its potential.

The question of how best to deal with the persistent "slack" in the labor market will loom large in the Fed's deliberations. "I think a significant number of individuals still are not seeking work because they perceive a lack of good opportunities, and a stronger economy would draw some of them back into the labor force," was how Fed Chair Janet Yellen diagnosed the problem earlier this summer in Cleveland.

"The fact we have still have millions outside of the workforce is attributable to both a lack of opportunities and that the nature of the available opportunities out there may not be strong enough in terms of wages and benefits," Claire McKenna with the National Employment Law Project (NELP) told CBS MoneyWatch.

McKenna is the co-author of ''Occupational Wage Declines Since the Great Recession," which found that when increases in the cost of living since the recession ended in 2009 are factored in, wages have actually declined for most occupations. The report also noted that this trend is decades old.

McKenna's study flagged that this wage decline was most pronounced for the lowest-wage workers in service-sector occupations in home health care, retail and restaurant sectors. Specifically from mid-2009 until 2014, cooks saw almost a 9 percent drop in their wages, janitors lost 6.6 percent and retail workers dropped 5 percent.

Even when workers at the bottom got a boost with the 2009 hike in the federal minimum wage to $7.25, McKenna said, "six years later it's actual value in real terms was 33 percent lower in 2014 than it was at its peak buying power in 1968."

McKenna's findings are based on data from the Occupational Employment Series Statistics from the Bureau of Labor Statistics, which tracks wage and employment trends for 800 occupations. "Averaged across all occupations, real median hourly wages declined by 4.0 percent from 2009 to 2014," according to the NELP report.

Another study released this week by the Economic Policy Institute documented that despite a solid increase in worker productivity since 2000, the actual wealth generated by those gains went to shareholders and top executives, not the workers.

McKenna said one way to remedy the downdraft in wages would be to establish a $12 minimum wage in five steps by 2020, as provided in proposed federal legislation. "In higher-costs states and cities, a $15-an-hour minimum wage should be considered," she said.

The decline in wages comes as a recent study documented that across much of America rents are rising faster than wages. "The State of the Nation's Housing 2015,",published by the Joint Center for Housing Studies, found that younger Americans were particularly hard hit by this squeeze play between rent and wages.

Here's how Harriet Fraad, a New York City therapist who specializes in helping individuals and families hit by a job loss and the economic dislocation that can come with long-term unemployment, put it. Fraad said: "Did you hear the joke about the twenty-something who comes home and says he's moving back in with his parents? The mom and dad say, 'sorry, we're on our way to live with your grandparents.'"