How Important is the Labor Force Participation Rate?
During the later Obama years, faced with the supposedly good news of falling unemployment rates, conservatives would console themselves with the argument that it was masking a deeper problem. That problem was the fact that laborers were dropping out of the work force permanently.
The unemployment rate only covers those in the workforce currently looking for work. Hence those who are employed, plus those who are looking for employment, equals the labor participation rate.
The Bureau of Labor Statistics, which assembles these crucial barometers of employment and participation, says that unsalaried and contractual workers, including those who are “self-employed,” are included in the statistics as “employed.”
Dropping out of the labor marketplace
So what should we take it to mean when individuals are no longer showing up on either employment or unemployment rolls?
This statistic is an important one, and one that is subject to much manipulation.
“This number of people not working, labor force participation rate, is a record 92 million people,” radio host Rush Limbaugh said in 2014:
This labor force participation rate plunge equals, on a percentage basis, where we were in 1978… So we’re now statistically right where we were in the middle of the Jimmy Carter disaster, and especially when you look at the similarity as a percentage basis was the labor force participation rate. All of this is just awful as an American, knowing that these are real people affected by this.
Well, now that his happy days are here again, Trump apologists like Limbaugh are either curiously silent about the labor participation rate, or they’re trying to act as if it’s no longer a big deal. The latter approach is the one that Limbaugh has decided to take, in a July broadcast:
The labor force participation rate. That has improved to its best since the 1980s!
The Labor Force Participation rate depends on if men are at work
But looking at a workforce participation rate from 1978 that includes both women and men is pretty much useless. That was at a time when far fewer women worked. So the 63.0 percent workforce participation in April 1978, and which is equal to the 63.0 percent workforce participation in February and March 2017, don’t tell you much.
The more useful comparison is to look at the male workforce participation rate of those 16 years and older. This graph shows a consistent decline over the past half-century. It was at 83.6 percent in January 1960, down to 77.8 percent in March 1978, and now stands 69.0 percent – which is pretty much what it’s been for the past five years.
A third chart, which charts male participation in the workforce from ages 25-54, or peak earning years, shows the same trend – almost not quite as starkly. There, the rate has dropped from 97.1 percent in 1960 to 94.0 percent in 1978, to 88.4 percent today.
For women, the chart of workforce participation for the same age group (ages 25-54) rose dramatically in the last decades of the 20th Century. It reached as high as 77.3 percent in April 2000. It, too, has declined with the vicissitudes of the recent labor marketplace. It now stands at 75.1 percent.
As the workforce participation rate includes self-employment – and doesn’t, of itself, point to the changing nature of work – the core number does suggest a problem: Of men 16-54, 11.6 percent are neither working nor looking for work. For similarly-aged women, 24.9 percent are neither working nor looking for work.
How are these people supporting themselves? What policies, if any, should federal and state governments be adopting to reach these workforce “dropouts?”
Whatever the answers to these questions, the first order of business is to pose an intelligent question that doesn’t mask two completely different trends.