The Decline In The U.S. Labor Force Participation Rate: A Literature Review

After peaking around the year 2000, the Labor Force Participation Rate (LFPR) of Americans declined substantially. The weakening in LFPR was faster after the financial crisis of 2007, the Great Recession. Since 2015, the LFPR has remained at its lowest in four decades. This paper constitutes a comprehensive review of the literature investigating the causes of the LFPR's recent decline. We determine what is known and identify the remaining gaps. The literature reviewed signals multiple causes behind this decline. Trend factors, such as long‐running demographic patterns, explain an important part of the decline. The research on the extent to which the Great Recession caused the decline establishes that most of the drop cannot be attributed to cyclical factors. Part of the decline in LFPR can be attributed to factors such as technological innovations and trade, which affect the participation rates of specific subpopulations, as well as to changes in social programs, like Social Security Disability Insurance. Some subpopulation trends are clear, but their ultimate causes are not fully understood, as is the case for the LFPRs of women and youth. We list these factors and point to important areas for future research.