Academic journal article Monthly Labor Review

Labor Force Participation: What Has Happened since the Peak?

Academic journal article Monthly Labor Review

Labor Force Participation: What Has Happened since the Peak?

Article excerpt

The labor force participation rate is the proportion of the working-age population that is either working or actively looking for work. (1) This rate is an important labor market measure because it represents the relative amount of labor resources available for the production of goods and services. Though subject to some cyclical influences, labor force participation is primarily affected by longer-term structural changes. (2) These might include changes in the age composition of the population, school enrollment and educational attainment, employer-provided pensions, or Social Security benefits.

After trending up for more than three decades, the labor force participation rate peaked at 67.3 percent in early 2000. Over the next few years, the rate receded to about 66 percent and stayed at that level through 2008. The participation rate then dropped again, and by mid-2016, it stood at 62.7 percent. (See figure 1.)

This article describes historical trends in labor force participation on the basis of estimates from the Current Population Survey (CPS), and it focuses on the participation rate since its peak in 2000. It examines changes in labor force participation among major demographic groups and discusses possible reasons for these changes.

Change in the age profile of the population

The age distribution of the population can strongly influence overall labor force participation. Figure 2 shows the change in the civilian noninstitutional population by major age group since 1948. For seven decades, the aging of the baby-boom generation--people born between 1946 and 1964--has profoundly affected the population's size and composition. For example, the population 16-24 years increased from 21.5 million in 1962 to 36.7 million in 1978. From 1971 to 2000, the large population cohort 25-54 years grew from 70.9 million to 120.7 million. After the oldest baby boomers turned 55 in 2001, the population 55 years and older rose from 58.7 million in 2001 to 87.1 million in 2015.

After remaining in a range of about 58-60 percent during the 1950s and 1960s, the total labor force participation rate increased rapidly during the 1970s and 1980s. (See figure 1.) In the 1970s and 1980s, baby boomers entered the age cohorts of 25-34 years and 35-44 years, which typically have very high levels of labor force participation. In recent years, the baby-boom generation has moved into the 55- years-and-older age group, which traditionally has had a lower participation rate. As just mentioned, the oldest baby boomers--those born in 1946--reached age 55 in 2001. In 2001, people 55 years and older made up 27 percent of the total population; by 2015, they composed 35 percent. (3) The aging of the population has put downward pressure on the overall labor force participation rate.

Labor force participation of selected demographic groups

Teenagers

The labor force participation rate of teenagers 16-19 years peaked in the late 1970s and then began a downward trend. (See figure 3.) The participation rate of teenagers fell from 52.0 percent in 2000 to 34.1 percent in 2011 and stayed near that level through 2015. (4) This decrease far exceeded the decline in the rates of other major age groups during this period.

From 2000 to 2015, the labor force participation rate of teenagers varied considerably by race and ethnicity. (See table 1.) In 2000, the participation rate ranged from 35.8 percent for Asian teenagers to 55.5 percent for White teenagers. Between 2000 and 2015, the participation rate of teenagers in each of the four major race and ethnicity groups fell sharply, with 2015 rates ranging from 20.6 percent for Asian teenagers to 36.4 percent for White teenagers. The decline in teenage labor force participation during this period coincided with a rise in the school enrollment rate--that is, the proportion of the population enrolled in school.

Between 2000 and 2015, the school enrollment rate of teenagers increased from 77. …

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