Labor Force Projections to 2020: A More Slowly Growing Workforce

By Toossi, Mitra | Monthly Labor Review, January 2012 | Go to article overview

Labor Force Projections to 2020: A More Slowly Growing Workforce


Toossi, Mitra, Monthly Labor Review


The recession of 2007-2009, a sluggish labor market, crises in the financial and credit markets, and weakness in the housing sector have combined to create great uncertainty about the future of the U.S. economy and labor market. However, despite all these problems, a positive force in the economy is the size and demographic composition of the U.S. population, which together determine the growth and composition of the labor force. As suggested by the saying "Demography is destiny," (1) demography is a key driving force in the growth of the U.S. economy, the growth of the labor force, and almost all social and economic trends.

Compared with the labor force of the past decades, today's labor force is older, more racially and ethnically diverse, and composed of more women. (2) These trends are expected to continue to shape the future of the workforce; however, the U.S. labor force is expected to grow at a slightly slower rate than in previous decades. The annual growth rate of the U.S. labor force over the 2010-2020 period is projected to be 0.7 percent, lower than the 0.8-percent growth rate exhibited in the previous decade. The labor force is projected to increase by 10.5 million in the next decade, reaching 164.4 million in 2020. This 6.8-percent increase in the size of the labor force is lower than the 7.9-percent increase posted over the previous 10-year period, 2000-2010, when the labor force grew by 11.3 million. (See table 1.)

The slower growth of the labor force is primarily the result of a slower rate of growth in the U.S. population and a noticeable decrease in the labor force participation rate. The civilian noninstitutional population 16 years and older had an annual growth rate of 1.1 percent from 2000 to 2010, but is projected to grow by a lesser 1.0 percent during 2010-2020. (See table 2.) In addition, the labor force participation rate started a downward trend in 2000, and the decrease accelerated during the 20072009 recession and its aftermath. As a result, the labor force participation rate declined by 2.4 percentage points over the 2000-2010 period and is projected to drop by another 2.2 percentage points between 2010 and 2020. These two declining factors lead to a projected annual growth rate of only 0.7 percent for the labor force from 2010 to 2020, a 0.1-percent drop from the annual growth rate exhibited in the 2000-2010 timeframe. (See table 3.)

The projected labor force growth over the next 10 years will be affected by the aging of the baby-boom generation, persons born between 1946 and 1964. The baby boomers will be between the ages of 56 and 74 in 2020, placing them in the 55-years-and-older age group in the labor force, with distinctively lower participation rates than those of the prime age group of 25-to-54-year-olds.

Changes in the labor force participation rate are generally gradual, and population growth is the chief factor in the growth of the labor force. However, during the recent recession, the aggregate labor force participation rate also decreased noticeably and affected the growth of the labor force. In the early days of the recession, in 2008, the aggregate participation rate was 66.0 percent. In 2009 the overall participation rate dropped by 0.6 percentage point, to 65.4 percent, and in 2010 it decreased even further, by another 0.7 percentage point, to 64.7 percent.

The Bureau of Labor Statistics (BLS) produces its labor force projections by multiplying the civilian noninstitutional population projections by the labor force participation rate projections. As a result, changes projected in the aggregate labor force are the reflection of changes in both the labor force participation rate and changes in the age, gender, racial, and ethnic composition of the population.

This article projects and profiles U.S. labor force trends in the next 10 years. First, on the basis of historical population data and projections from the U.S. Census Bureau, past and future trends in the U. …

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