Structural Influences on Participation Rates: A Canada-U.S. Comparison

In contrast to the decline in labour force participation in Canada in the 1990s, the aggregate participation rate in the United States actually rose slightly (up 0.5 percentage points between 1989 and 1997). This US experience provides a useful benchmark for the analysis of the Canadian developments. In the second article of the symposium, Irene Ip, Sheryl King and Geneviève Verdier, while recognizing that cyclical influences have contributed significantly to the decline in labour force participation in the 1990s in Canada relative to the United States, focus on supply-side factors at play in the behviour of the participation rate in the two countries. A key structural variable influencing youth labour force participation is enrolment rates. As the participation rate of students is below that of non-students, increased enrolment tends to reduce aggregate participation. Enrolment rates for teenagers increased 7 percentage points in Canada between 1989 and 1997, and 5 points in the United States; rates for youth adults increased 11 points in Canada and 7 points in the United States. As the U.S. economy enjoyed low unemployment in both 1989 and 1997, the rise in enrolment rates was related to structural factors, such as the growing recognition of the importance of education for success on the job market. Structural factors were undoubtedly at play in Canada . However, the authors suggest that the increase in enrolment rates beyond that experienced in the United States (29 per cent of the increase in enrolment rates for teens and 36 per cent for young adults) may be interpreted as a cyclical response to weak employment opportunities in Canada. The authors find composition changes in the age structure of the population account for about one percentage point of the decline in the aggregate participation rate in Canada between 1989 and 1997, as the relative importance of low-participation rate groups has increased. Based on an analysis of the factors affecting labour force participation of the major age-sex groups, the authors forecast a rise in the aggregate participation rate in Canada from 65.1 per cent in 1998 to 66.6 per cent in 2006. For the United States, the Bureau of Labor Statistics is forecasting a smaller increase, but from a higher level, to 67.6 per cent in 2006 from 67.1 per cent in 1998. The authors expect increases in labour force participation for all age-sex groups in Canada. Between 1998 and 2006, the participation rate is forecast to rise 4.6 percentage points for older men (55 and over), 3.8 points for older women, 3.7 points for prime age women, 8.9 points for teenagers, 3.5 points for young adults, and even 1.0 points for prime-aged men. The 1.5 point increase in the aggregate participation rate is much smaller than almost all the increases in the age-sex group specific rates because of the changing age structure, in particular the increasing proportion of the population in older age groups.