The US labor force participation rate has fallen by about three percentage points since the Great Recession. Of that decline, Barclays thinks two points are due to population aging. The rest it blames on less participation within various age groups. Now overall, the US still has participation rates higher than Germany, Japan, and UK — the other large, advanced economies Barclays examines in a new report. But US participation dropped a lot more than those nations between 2005 and 2014. And it has particularly dropped a lot for working-age Americans versus that age group in other nations. Barclays:
The most striking aspect of the first question is the decline in US participation by men and women in their prime working years. In Japan, Germany, and the UK, changes in participation within these population groups added at least a percentage point to the overall rate of participation from 2005 to 2014 (Figure 2), led mainly by a trend increase in female labor force participation.
But in the US, participation of prime working men and women fell over this period, dragging the overall rate of participation down by a full percentage point. The movement of female participation is particularly striking; in the US, this peaked in the mid-1990s and has been drifting downward since. In the other three countries, female labor force participation has continued to climb.
The uniquely American decline in the participation by working-age men and women puts the US in a long-standing contrast to Japan, Germany, and the UK, and is hard to explain on cyclical grounds, because it long predates the 2008-09 recession to which, anyway, the other countries were also exposed. And it leaves the US with a 2014 participation rate that is quite low by international comparison.
Barlcays find this all “counterproductive” since the US has a higher overall participation rate. But, as the bank explains, “this turns out to be entirely due to the more favourable US demographic structure. For example, the US rate of labor force participation is lower than Japan’s for every demographic group that we consider, except the young (15-24) population some of whom might be
more productively occupied in school for advanced training than in paid employment. … After adjustment for demographic composition, the US has the lowest, not the highest rate of participation.”
“Puzzling” is what Barclays call it. But I wonder if the the depth of the recession in the US isn’t a factor. After all, US participation crawled higher from mid-2004 through the start of 2007, then whammy. Also, maybe more of our potential younger workers — mid-to-late 20s — went to school or stayed there. I dunno.
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