A Cohort-Based Model of Labor Force Participation

Abstract

The probability that an individual participates in the labor force declines precipitously beyond age 50. This feature of labor supply suggests that ongoing shifts in the age distribution of the population will put substantial downward pressure on the aggregate labor force participation rate. However, the aggregate rate is also influenced by trends within age groups. Neglecting to model both within-group influences and shifting population shares will doom any estimate of aggregate labor supply. We develop a model that identifies birth cohorts' propensities to participate, uses these propensities to derive age-specific trends in participation rates, and explicitly incorporates the influence of shifting population shares in estimating aggregate labor force participation.

The Plateau in U.S. Women's Labor Force Participation: A Cohort Analysis

“…This paper uses March Current Population Survey (CPS) data from 1968 to 2010 to assemble a clear and detailed catalog of facts about the plateau in U.S. women's labor force participation. Following and extending earlier work by Goldin () and Fallick and Pingle (), I find that a great deal of what has happened to FLFP can be succinctly summarized in terms of trends across birth cohorts. In addition to providing a more up‐to‐date cohort analysis, I conduct shift‐share analyses that document within‐group trends and composition effects based on disaggregations by educational attainment, marital status, and child‐care responsibilities .…”

“…Macunovich () presents the change in FLFP by socioeconomic subgroup over time using March CPS data for 1976 through 2009, but does not look at compositional changes of the subgroups. Fallick and Pingle () do decompose the changes in male and female labor force participation rates over time into group‐share and within‐group changes, but the subgroups for their decompositions are based only on age.…”

“… Fallick and Pingle () also point out that FLFP leveled off with the cohorts born in the early 1950s. …”

“… See Juhn and Potter () and Fallick and Pingle () for the trend in U.S. men's labor force participation. …”

On the Sidelines

“…The authors conclude that cyclical fluctuations played a major role in falling labor force participation rates beginning with the 2001 recession, but long-run structural trends present a more serious challenge to labor force growth. Fallick and Pingle (2006) present an empirical model of labor force participation that incorporates both demographic changes as well as historical changes; that is, their model decomposes changes in labor force participation rates into the effects of changing demographic distributions of the population and to the effects of changing trends in labor force participation within each age group. Their contribution to the literature focuses on shifts both within the age distribution of the population as well as shifts within each age cohort.…”