Academic journal article Monthly Labor Review

An International Comparison of Labor Force Participation, 1977-84

Academic journal article Monthly Labor Review

An International Comparison of Labor Force Participation, 1977-84

Article excerpt

An international comparison of labor force participation, 1977-84

Over the past decade there have been substantial changes in the structure and performance of labor markets in most countries. These changes stem from changes in various economic factors such as the oil price crises in 1974 and 1978 and the subsequent slowdown in economic growth and emergence of international recession. However, labor force responses since 1975 to these changes have varied considerably between countries and the outcomes may usefully be compared and contrasted. In this article, six countries with similar approaches to labor force measurement are compared.1 The largest is the United States, followed by Japan and West Germany. The smallest markets considered are, in order of size, Canada, Australia, and Sweden.

The aggregate participation rates in each country are shown in table 1. The range is large. Sweden had the highest labor force participation, rate, followed by Canada, the United States, Japan, Australia, and West Germany.2

The overall changes in labor force participation since 1975 are also shown in table 1. In Australia the labor force participation rate fell 1.7 percentage points from 61.6 percent in 1975. West Germany and Japan experienced little change in the aggregate participation rate. By contrast, labor markets in the other countries were characterized by large growth in participation rates, particularly in Canada and the United States. In Sweden, which had the highest proportion of the working age population in the labor force of any country considered, the participation rate rose by slightly less.

The magnitude and nature of these different changes in the aggregate labor force participation rate can be seen more clearly by examining the change in the labor force participation rate (shown in column 3) decomposed into the change in the employment-population ratio (shown in column 4) and, completing the identity, the change in the unemployment-population ratio.3

In all countries but the United States, the employment-population ratio either increased by less than the participation rate or fell between 1975 and 1984. Australia and West Germany also stand apart from the remaining countries, having experienced both a large decline in employment growth relative to population growth and hefty increases in unemployment. The fall in participation in Australia decomposes into a large fall in the employment-population ratio accompanied by a smaller offsetting increase in unemployment. In West Germany, contrary to the Australian experience, the effect of a fall in the employment-population ratio was completely offset by an increase in unemployment. In Japan, almost all of the small increase in the participation rate was attributable to a small increase in the employment-population ratio, while, in Canada, most of the increase in participation rate decomposes into a dominant increase in unemployment. In Sweden, both employment and unemployment grew roughly by the same magnitude, at least according to the official "unadjusted data' for the population aged 16 to 74. BLS estimates, shown as the "unadjusted data' for the population aged 16 and over, suggest that in Sweden the participation rate altered predominantly from an increase in unemployment with very little change in the employment-population ratio.

Of all the countries examined, the Australian and U.S. experiences appear to be unique at either end of the spectrum. Only Australia experienced a large decline in the participation rate together with a very large increase in the unemployment-population ratio, and only the United States experienced a large increase in the participation rate together with a decline in the unemployment-population ratio.

Changes in composition

Observed changes in the labor force may reflect shifts in the age and sex structure of the population, changes in labor force behavior within demographic groups, or both. …

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