I think the low labor force participation rate is an indication of at least a couple of things: a surplus capacity of workers and wages that are too low. Both are related, but different.
We have low wages because there are too many people for the few jobs that are available. Some people simply cannot find work (surplus workers), while others will choose not to work because wages are too low. Many people are living with other relatives or living with more people per household, enabling some to stay home (adult kids living with parents, stay-at-home parents, and seniors who are moving in with their kids or other family members, etc.).
Personally, I don’t think that the low participation rate is a bad thing, especially for those who find it more economical to stay out of the workforce (see my posts about the cost of work being higher than the net income from many jobs, especially for second income earners in families with young kids).
