Magazine article Economic Trends

Labor Force Participation in the United States and Ohio

Magazine article Economic Trends

Labor Force Participation in the United States and Ohio

Article excerpt

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A key determinant of the size of the labor force is the labor force participation rate. The labor force participation rate is the fraction of the working age population (16-year olds and up) that is currently employed or actively looking for employment. Changes in the labor force participation rate along with the growth in the population determine the growth in the labor force. For the nation as a whole, the labor force participation rate has risen markedly since World War II. This rise is well documented and is due primarily to the increased participation of women in the labor force and the U.S. baby boom after WWII.

Ohio has also experienced a substantial rise in its labor force. Closing out the last century, the gains in Ohio's rate of labor force participation were similar to those of the nation as a whole. From 1980 through 2000, the U.S. rate rose 3.4 percentage points, and Ohio's rose 3.7 percentage points. However, from 2000 to 2006, the national labor force participation rate dropped 1 percent to 66.2 percent, while Ohio's edged up 0.1 percent to 67.2.

What is behind these recent patterns in labor force participation rates? Several studies have noted that important shifts in the labor force participation rates of specific age groups have affected overall labor force participation rates. The table below illustrates this observation by disaggregating labor force participation rates into different age groups for the years 2000 and 2006. For workers under the age of 55, labor force participation rates fell or held steady in the United States as well as in Ohio. For workers over the age of 55, participation rates rose. Somewhat surprisingly, labor force participation for individuals in the 16 to 19 age group drops quite a bit. Nationally, the labor force participation rate of these younger workers fell 8.5 percentage points, roughly 16 percent--a very large downward shift for this group. Ohio has also experienced a relatively large drop in labor force participation for this age group, though not as large as the U.S. decline. Aternatively, older workers have markedly increased their participation rates. Workers aged 55 to 64 increased their labor force participation by 4.5 percentage points across the United States and by 6.8 percentage points in Ohio. This rise in the labor force participation of older workers is a more recent phenomenon, having begun in the mid-1990s.

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In order to see which age groups of workers have had the largest impact on changes in labor force participation rates over the 2000-2006 period, we do a decomposition analysis. The analysis separates the changes in overall labor force participation rates into two sources: one is that the participation rates of different age groups could be changing, and two is that the share of workers in each group could be growing or shrinking. For example, the labor force participation rates for age groups could hold steady but if the share of workers in high labor-force-participation groups fell (age groups 25 through 54), then overall labor force participation rates could fill. …

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