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Economy in Brief

Where Have All The Workers Gone?
by Tom Moeller  January 22, 2014

"It's tough to get good help these days" has long been potential employers' lament. The problem lately has been attributed to many factors; the early retirement of baby boomers, young potential workers staying in school, increased disability rates and mismatched skill-sets. Researchers at the Urban Institute also propose that a lower labor force entry rate, rather than a higher exit rate, has been the primary factor behind the drop in the overall participation rate. Whatever is having the greatest influence, the decline has been pervasive.

The overall labor force participation rate is the number of potential workers aged 16 & over as a percentage of the population. In December, the rate of 62.8% was down from the 2013 average of 63.3%. It's also down more than four percentage points from the 67.1% peak maintained from 1997 through 2000. (A side-note is that if the participation rate had stayed at this peak, it's estimated that the current 6.7% rate of unemployment would be roughly one percentage point higher.)

Declines in labor force participation are pervasive, but activity in the youngest and oldest age groups is notable. Amongst those under age 25, the participation rate has fallen by 13.6 percentage points since 1989 to 55.0% in 2013. For teenagers alone, the rate has fallen 23.5 percentage points since 1979 to 34.4%. At the other end of the age spectrum and working higher, last year's participation rate of 40.3% for those aged 55 & over was up from 29.4% twenty years ago. In the middle aged brackets, labor force participation rates all have moved downhill. The declines, however, are far less than realized earlier in life. For individuals aged 25-34, last year's participation rate of 81.2% was down 3.4 percentage points from the 2000 peak. For those aged 35-44, last year's rate of 82.2% was down 3.0 percentage points from the 1990 peak. For those aged 45-54 the rate of 79.7% was 2.9 points lower than the 1999 high.

By gender, the differing long-term movements in labor force participation rates are striking. The male participation rate has been in decline since World War II. Like the total, the young and middle age brackets have fallen steadily. The eldest age cohort, however, realized an increase to 46.5% in 1993 following a decline to 37.7% in 1993. The female participation rate shows a notably different pattern from men. The overall participation rate rose throughout the postwar period to a high of 60.0% in 1999 from 32.7% in 1948. Since then it's slipped to 57.2%. Notable was the increase for those between ages 25 and 54 to 76.8% in 1999, more than doubling the postwar entry rate. Like men, older women raised their participation rate sharply to 35.1% last year from 22.0% in 1987.

The minimal 0.5% annual growth in employment averaged during the last 15 years probably is responsible for much of the participation rate declines as workers grew discouraged over job prospects. At the same time the young stayed in school, family responsibilities grew and out-dated work skills forced retraining. Looking ahead, some improvement in the medium-term forces restraining job growth seems likely given the degree of monetary and fiscal stimulus that recently has been put in place. These forces, however, are working against strong structural headwinds that may have not yet run their course.

Labor Force Participation Rates (%) Dec 2013 2008 2003 1998 1993 1988
Total 62.8 63.3 66.0 66.2 67.1 66.3 65.9
  16-24 Years 54.8 55.0 58.8 61.6 65.9 66.1 68.4
  25-34 Years 81.0 81.2 83.4 82.9 84.6 83.3 83.3
  35-44 Years 82.1 82.2 84.1 83.9 84.7 84.8 84.6
  45-54 Years 79.2 79.7 81.9 82.1 82.5 81.6 79.6
  55 and Over 39.9 40.3 39.4 35.7 31.3 29.4 30.0
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