Abstract
The objectives of this paper are twofold. Aggregate labor force participation rates in the United States are described focusing on educational attainment. A model is developed for decomposing aggregate labor force participation rates for men and women from 1994 to 2014 from a unique perspective by focusing on changes in educational attainment and on changes in the labor force behavior. The findings presented here indicate that men’s aggregate labor force participation rates declined during the 20-year period at all levels of educational attainment, due primarily to changes in population shares. A different picture emerges regarding women. For women with high school or some college or associate degree, it was changes in labor force behavior that dominated changing aggregate labor force participation rates. For women with the lowest and highest levels of educational attainment, less than high school or at least a baccalaureate degree, it was changes in their population shares that drove changes in aggregate labor force participation rates.
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Notes
Toossi views labor force participation as a binary variable, “In” or “Out”. This does not take into consideration the number of hours worked.
Individuals 25 years and older are here defined as “prime age” workers in that major investments in human capital have been achieved. Under the age of 25, labor force attachment is more tenuous due to incomplete human capital investment and tentative career plans. Although retirement decisions begin to play a role in labor force participation decisions after the age of 54, data limitations do not permit a more finely stratified sample. Finally, prime age workers are less affected by business cycle fluctuations due to their relatively greater attachment to the labor market.
“Baby Boom” may be defined as a vigorous increase in a nation’s birth rate. In the United States, this occurred between the years 1946 and 1964. By the mid-1960s to the 1970s, young people, ages 16 to 24 years, began to enter the labor market, increasing their share of the labor force. This trend continued into the 1980s when the majority of “Baby Boomers” were 25 years or older and reaching their strongest attachment to the labor force. Fallick and Pingle (2006) find that after 2002 two-thirds of falling aggregate labor force participation was due to changes in the demographic shares of Baby Boomers moving from higher to lower participation rates.
A paradox is the falling labor force participation rates for all age categories except for men over the age of 54, where labor force participation has risen since the mid-1990s.
Household technologies changed during the latter half of the twentieth century with the introduction of labor saving devises such as washing machines, clothes dryers, freezers, and permanent press clothing. This may have had a greater effect on women’s entry into the labor force than changing tastes or social attitudes.
Bowen and Finegan (1969) note other dimensions of schooling that are difficult to measure, such as the quality of schooling and the extent of education, received at home or within the community, and education and training in the military. One should be aware of the interrelation between structural and cyclical factors in the decision to join the labor market. For example, recession may lower the opportunity cost of leisure and lead to greater investment in education, which in turn can lead to a more permanent attachment to the labor force at a later date.
Becker notes that as the rates of return on investment in education differ among various demographic groups, so do the resulting differences in the proportion of high school graduates pursuing a university education. Becker also notes, “The typical investor in human capital is more impetuous and thus more likely to err than is the typical investor in tangible capital” (Human Capital, p. 16).
Although LFPRs rose only for those with less than high school during the time from 1994 to 2014, their participation rates remained the lowest, at 45% in 2014, followed by those with high school (58%), some college (67%), and 75% for those with at least a university (or college) degree (U.S. Bureau of Labor Statistics 2015).
Four-year differences are approximate due to data limitations.
Those persons temporarily absent from their regular jobs, paid or unpaid, are also considered “employed”. These absences include vacation, illness, child-care or other family or personal obligations including maternity or paternity leave, workers involved in industrial disputes, and those prevented from working due to weather limitations.
BLS data aggregated for both men and women 25 years of age and older show declining LFPRs for all but those with less than a high school degree, where LFPRs rose during the 20-year period. The difference may be attributed to the inclusion of workers over the age of 64 in BLS data, where LFPRs have been rising since the mid-1990s due in part to changes in Social Security eligibility, which provides a premium each year for workers who forego benefits up to the age of 70. Figure 4 represents men and women between the ages of 25 and 64 (inclusive).
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Falzone, J.S. Labor Force Participation and Educational Attainment in the United States. Int Adv Econ Res 23, 321–332 (2017). https://doi.org/10.1007/s11294-017-9646-8
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DOI: https://doi.org/10.1007/s11294-017-9646-8