Points of View

Exploring Reasons for the Rebound in Labor Force Participation

Sam Stebbins

A new article from Brookings takes a look at the “recent rebound” labor force participation rates (LFPR) among prime age (25-54-year-old) adults. After a “decades-long decline” in male participation along with a 15-year decline in female participation, new data shows that a growing number of adults are joining the labor force.

 

This rebound coincides with the recovery from the Great Recession. However, Brookings notes that there are many factors to consider when determining the cause for this return to work. Authors Audrey Breitweister, Ryan Nunn, and Jay Shambaugh write that improvements to LFPR in the coming months will be “crucial to determining whether recent progress constitutes merely a rebound from a cyclical low or an actual reversal of the downward trend.” Determining which is the case will be crucial to “long-run growth and current macroeconomic policymaking.”

 

Trends in LFPR

Overall, both men and women saw declines in LFPR between 2000 and 2015. After September 2015, however, LFPR for both men and women “sharply rebounded.” Measured against January 2000 rates, women have made up 40% of their decline and men have made up 25%.

 

Because this rebound occurred in the past three years, a large factor may be recovery from the Great Recession. However, economists have debated how much can be attributed to this factor. For example, there has been an increase in older workers, which may be caused by improved health and longevity as well as changes to Social Security rules.

 

Additionally, LFPR has improved but not yet returned to levels seen in 2007. “This suggests there may still be some room for participation to continue to increase based on cyclical factors alone.”

 

LFPR by Education and Gender

One way to better understand LFPR is to take a look at trends by educational attainment and gender.

 

Between 2000 and 2015, LFPR fell more for people with lower levels of educational attainment. According to the report, this gap could potentially be closed through either increasing the skills of these workers or “increasing the returns to low-education jobs.” Furthermore, because tight labor markets tend to “disproportionately boost the returns to work of low-wage workers,” continued strength in the labor market should bring more workers back to the workforce.

 

Finally, over half of prime-aged women outside of the labor force list caregiving responsibilities as the reason they are unable to join the workforce. Increased access to child care and elder care would bring more women back to work. Without this access, Brookings says, “it would not be possible to increase these peoples’ participation.”