Unemployment is down. The number of job openings is up. But the US labor force participation rate is still shrinking.
Today, fewer Americans age 16 and older are participating in the labor force than at any time since 1978, according to a report from the Bureau of Labor Statistics.
The report, published in December, charts the decline in labor force participation since the end of World War II. It found that since 2000, the percentage of participating Americans has declined from 67 percent to 63 percent in 2013. The civilian labor force includes both employed and unemployed workers.
The aging of the US population is a contributing factor to its labor force decline, researchers say. The Chicago Federal Reserve Bank said it accounted for just under half of the current drop. Barclays attributed it to half of the decrease. And a Federal Reserve Bank of Philadelphia report said that since 2011, baby boomers’ retirements have been the sole reason for the participation fall.
Looking forward, the mass retirement of baby boomers from the labor force will continue this participation rate decline, the Chicago Fed report says.
This demographics-influenced labor force participation decline may be cause for worry, as participation is a key indicator of the health of the economy, said Claudia Goldin, an economics professor at Harvard University.
Labor participation by gender
The decline in labor force participation is not being experienced by men and women equally.
Women’s increased participation in the country’s workforce fueled the growth in total participation during the second half of the 20th century, peaking at 60 percent in 1999. Since then, however, it has declined each year.
But the percentage of working men has been declining since the end of World War II. In 1948, about 87 percent of men age 16 and older worked. In 2013, that rate had dropped below 70 percent.
“The big issue is the decline among men,” said Goldin.
She says the decline is an indication of other problems, such as a discouraged workforce or spike in the use of Social Security Disability Insurance.
The decreases in working men since the 1950s have been attributed to stagnating wages, changes in safety net programs like Social Security Disability Insurance, and the increased participation of women, according to Chicago Fed research.
An aging labor force, on both ends
The shrinking labor force is also attributed to young people delaying entering the workforce. Today more young people are prolonging their post-secondary education, entering the country’s workforce older, according to the Chicago Fed. While that has contributed to the decline in labor force participation, it is not necessarily a bad thing, said Goldin.
“We want them to be in school,” Goldin said, adding that entering the workforce with more education ultimately increases a person’s participation.
While fewer 16- to 24-year olds are in the labor force, the percentage of Americans who work into their 60s and 70s is growing. According to the Chicago Federal Reserve report, this is in part because more Americans are working longer to accumulate the money needed for lengthier retirements.
Women, in particular, are staying in the labor force longer, which could be an indication of their overall increased participation during the 20th century or a trend of “transition” careers that ease workers into retirement, said the report.