Labor Force Participation: Recent Developments and Future Prospects

Abstract

Since 2007, the labor force participation rate has fallen from about 66 percent to about 63 percent. The sources of this decline have been widely debated among academics and policymakers, with some arguing that the participation rate is depressed due to weak labor demand while others argue that the decline was inevitable due to structural forces such as the aging of the population. In this paper, we use a variety of approaches to assess reasons for the decline in participation. Although these approaches yield somewhat different estimates of the extent to which the recent decline in participation refl ects cyclical weakness rather than structural factors, our overall assessment is that much-but not all-of the decline in the labor force participation rate since 2007 is structural in nature. As a result, while we see some of the current low level of the participation rate as indicative of labor market slack, we do not expect the participation rate to show a substantial increase from current levels as labor market conditions continue to improve.JEL Codes: E24, E32, E66, J21, J26.Keywords: Labor force participation, retirement behavior, disability insurance, implications of an aging population, youth employment, labor market slack, labor market fl uctuations and the business cycle.

The New Normal: Demand, Secular Stagnation, and the Vanishing Middle Class

“…"Demand-deficiency" explanations have been brushed aside based on evidence that the so-called output gap between actual GDP and its potential is currently quite narrow for the 170 INTERNATIONAL JOURNAL OF POLITICAL ECONOMY U.S. economy (see Figure 1). Potential output has come down partly as a result of demographic stagnation, due to an aging labor force (Aaronson et al 2014). But the real problem, in this supply-side view, is the alarming faltering of total-factor-productivity (TFP) growth, which is considered the main constituent of potential output growth and "the best available measure of the underlying pace of innovation and technological change" (Gordon 2015: 54).…”

“…It would not require sustained fiscal stimulus, higher real wages, or a restructuring of the private debt overhang, however. , c. 1950, c. -c. 2014, c. Fernald (2014 Furman (2015) Gordon (2015) Jones (2015) c. 1947-1973, 1973-1995, and 1995-2007. Furman's (2015 periods are: 1948-1973, 1973-1995, and 1995.…”

La Participación Laboral y el Ciclo Económico en México

“…Para analizar los efectos de los cambios en el perfil de la fuerza laboral, utilizamos la metodología de cambio-participación propuesta por Lazear y Spletzer (2012). Por su parte, para estudiar la respuesta al ciclo económico empleamos las metodologías propuestas por Aaronson et al (2014) y Stock (2014) que estimaron los efectos del ciclo económico en la TPFL de Estados Unidos. El primer método explota las disparidades en la tasa de participación a nivel estatal para identificar los efectos del ciclo económico en la tasa de participación en la fuerza laboral.…”

“…Dada la extensa literatura que expone movimientos significativos en la tasa de participación durante fluctuaciones del ciclo económico (ver Aaronson et al, 2014;CEA, 2014;Stock, 2014;Shierholz, 2012 Dell (2005), este aumento estuvo principalmente localizado en la parte central de México y fue debido, en parte, a que el TLCAN redujo la discriminación de las mujeres en empresas nacionales. 7 En particular, Campos-Vazquez y Velez-Grajales (2014) propone que un esposo con una madre trabajadora puede promover la participación en el mercado laboral de su esposa.…”

“…Por ende, en la presente sección explotamos estas variaciones utilizando el modelo propuesto por Aaronson et al (2014) (Arellano y Bond, 1991). Con respecto a los efectos del ciclo económico sobre la tasa de participación laboral, nuestro modelo con un término autorregresivo presenta evidencia mixta para dicha relación.…”