by Amanda Rohrer
Together, all the people who want to work—regardless of whether they actually do—make up the labor force. The concept of the labor force is critical because it’s essentially a measure of all the people available to fill jobs. In the midst of a recovery and the highest recorded levels of long-term unemployment, labor force participation rate can help illuminate how many people are available and what roles they’re likely to play in Minnesota’s labor force.
Labor force participation is tied to economic, social, and demographic characteristics. In the 1970s, for example, much of the growth in labor force participation was caused by an increasing share of women entering the workforce.
The overall labor force participation rate (the share of the adult population who wants to work, is available to work, or who is working) has been declining since 2001.This decline is primarily because the baby boom generation is beginning to reach retirement age. Teens have been changing their labor market behaviors, too. Today’s teens are much less likely to have a job than a decade ago. Trends have been complicated, however, by the recent recession.
Recession and Recovery
During recessions and recoveries, there is often a decline in labor force participation because people drop out of the labor force when there isn’t an incentive to stay in: the available jobs pay less, finding a position is more difficult, or people have found that they can live on less and prefer it.
The group that had the largest trend change during the recession was 20-24 year olds. Labor force participation among these workers declined rapidly during the recession, and has not yet returned to normal. On the other hand, there were increased in labor force participation for workers age 55 and older. These older workers may be delaying retirement for various reasons. However, the participation rates for the 55 and over age group are still well below the rates for the 45 to 54 age group; baby boomers may not be retiring as early as their predecessors, but enough are retiring to push the overall labor force participation rate downward.
The fact remains that labor force participation rates in Minnesota have been declining over the last decade. The underlying cause—the aging population—will play out in the future of our workforce. Knowing the shape of the labor force that is to come can help employers and managers know what to expect.