Direct and indirect effects of demographic structures on the labour force participation rate

Abstract

The composition of the workforce according to education and age is an important determinant of the labour force participation rate. Education and age of the working-agepopulation determine the level of economic activity through specific activity rates (direct effect) and through the numerical distribution of the population according to educational and age categories (indirect effect). The nature of the basic relationship between demographic structures and the level of activity is already well known and explained, but in previous works in which changes in the level of economic activity were investigated, there is a lack of analyses that would break down the difference in the value of the general rate of activity of the labour contingent into the contribution of the components that participate in that change, which would create space for public policies and the implementation of measures aimed at expanding the scope of the workforce. Therefore, this scientific paper quantifies the indirect (composite) and direct (behavioural) effects of the educational and age structure of the workforce during the period 2002-2021. It is assumed that for oscillations in the level of activity there was a more significant contribution of behavioural effects, that is, compared to composite effects, they had a stronger influence both when the labour force participation rate was falling (2002-2011) and when it was growing (2011-2021). The analysis is based on data from the Labour Force Survey, and the method of decomposition of general rates, often used in demography, was used to quantify the individual contribution of effects.