IDEAS home Printed from https://ideas.repec.org/p/mrr/papers/wp385.html
   My bibliography  Save this paper

The Decline in the U.S. Labor Force Participation Rate

Author

Listed:
  • Francisco Perez-Arce

    (University of Southern California)

  • Maria J. Prados

    (University of Southern California)

  • Tarra Kohli

    (University of Southern California)

Abstract

After peaking around the year 2000, the Labor Force Participation Rate (LFPR) of Americans declined substantially, falling faster after the financial crisis of 2007. Since 2015, the LFPR has remained at its lowest in four decades. In this paper, we produce a comprehensive review of the literature investigating the causes of the recent decline in LFPR. We include works from the academic literature as well as the gray literature from research institutes and labor market experts, and published and unpublished studies. The literature reviewed signals multiple causes behind this decline. The research on the extent to which the Great Recession had caused the decline establishes that most of it cannot be attributed to cyclical factors. Additionally, the literature examines the relative importance of trend factors, such as long-running demographic patterns, which explain at least part of the decline. The review includes articles that aim to quantify the impact of one or more factors through statistical or econometric analysis or economic modeling. Demographic trends, like the aging of the Baby Boom Generation, explain a large portion of the decline. The rest of the decline can be attributed to factors that affect the participation rates of specific subpopulations, such as technological innovations and trade, as well as to changes in social programs, such as Social Security Disability Insurance. Some subpopulation trends are clear, but their ultimate causes are not fully understood, as is the case for female and youth LFPRs. We list these factors and point to important areas for future research.

Suggested Citation

  • Francisco Perez-Arce & Maria J. Prados & Tarra Kohli, 2018. "The Decline in the U.S. Labor Force Participation Rate," Working Papers wp385, University of Michigan, Michigan Retirement Research Center.
  • Handle: RePEc:mrr:papers:wp385
    as

    Download full text from publisher

    File URL: https://mrdrc.isr.umich.edu/publications/papers/pdf/wp385.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Devah Pager, 2003. "The mark of a criminal record," Natural Field Experiments 00319, The Field Experiments Website.
    2. Dionissi Aliprantis & Mark E. Schweitzer, 2018. "Opioids and the Labor Market," Working Papers (Old Series) 1807, Federal Reserve Bank of Cleveland, revised 15 May 2018.
    3. Chen, Susan & van der Klaauw, Wilbert, 2008. "The work disincentive effects of the disability insurance program in the 1990s," Journal of Econometrics, Elsevier, vol. 142(2), pages 757-784, February.
    4. Kory Kroft & Fabian Lange & Matthew J. Notowidigdo, 2013. "Duration Dependence and Labor Market Conditions: Evidence from a Field Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1123-1167.
    5. Mette Foged & Giovanni Peri, 2016. "Immigrants' Effect on Native Workers: New Analysis on Longitudinal Data," American Economic Journal: Applied Economics, American Economic Association, vol. 8(2), pages 1-34, April.
    6. David Card & Alan B. Krueger, 1994. "The Economic Return to School Quality: A Partial Survey," Working Papers 713, Princeton University, Department of Economics, Industrial Relations Section..
    7. Chinhui Juhn & Simon Potter, 2006. "Changes in Labor Force Participation in the United States," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 27-46, Summer.
    8. Douglas A. Webber & Melissa J. Bjelland, 2015. "The Impact of Work‐Limiting Disability on Labor Force Participation," Health Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 333-352, March.
    9. Michelle Rendall, 2018. "Female Market Work, Tax Regimes, and the Rise of the Service Sector," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 28, pages 269-289, April.
    10. Blau, Francine D. & Kahn, Lawrence M., 2013. "Female Labor Supply: Why is the US Falling Behind?," IZA Discussion Papers 7140, Institute of Labor Economics (IZA).
    11. Francine D. Blau & Lawrence M. Kahn, 2013. "Female Labor Supply: Why Is the United States Falling Behind?," American Economic Review, American Economic Association, vol. 103(3), pages 251-256, May.
    12. Courtney Coile & Mark Duggan & Audrey Guo, 2015. "Veterans' Labor Force Participation: What Role Does the VA's Disability Compensation Program Play?," American Economic Review, American Economic Association, vol. 105(5), pages 131-136, May.
    13. Henry S. Farber & Dan Silverman & Till von Wachter, 2016. "Determinants of Callbacks to Job Applications: An Audit Study," American Economic Review, American Economic Association, vol. 106(5), pages 314-318, May.
    14. Daron Acemoglu & Pascual Restrepo, 2018. "Demographics and Automation," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-299, Boston University - Department of Economics.
    15. David H. Autor & Mark G. Duggan, 2003. "The Rise in the Disability Rolls and the Decline in Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 157-206.
    16. Goldin, Claudia D. & Katz, Lawrence F., 2011. "The Cost of Workplace Flexibility for High-Powered Professionals," Scholarly Articles 8737996, Harvard University Department of Economics.
    17. Christopher J. Erceg & Andrew T. Levin, 2014. "Labor Force Participation and Monetary Policy in the Wake of the Great Recession," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 3-49, October.
    18. repec:fth:prinin:334 is not listed on IDEAS
    19. Regis Barnichon & Andrew Figura, 2016. "Declining Desire to Work and Downward Trends in Unemployment and Participation," NBER Macroeconomics Annual, University of Chicago Press, vol. 30(1), pages 449-494.
    20. Michelle Rendall, 2011. "The Service Sector and Female Market Work: Europe vs US," 2011 Meeting Papers 778, Society for Economic Dynamics.
    21. Selahattin Imrohoroglu & Sagiri Kitao, 2012. "Social Security Reforms: Benefit Claiming, Labor Force Participation, and Long-Run Sustainability," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 96-127, July.
    22. Daron Acemoglu & Pascual Restrepo, 2018. "Demographics and Automation," Boston University - Department of Economics - Working Papers Series dp-299, Boston University - Department of Economics.
    23. Justin R. Pierce & Peter K. Schott, 2016. "The Surprisingly Swift Decline of US Manufacturing Employment," American Economic Review, American Economic Association, vol. 106(7), pages 1632-1662, July.
    24. Nicole Maestas & Kathleen J. Mullen & Alexander Strand, 2013. "Does Disability Insurance Receipt Discourage Work? Using Examiner Assignment to Estimate Causal Effects of SSDI Receipt," American Economic Review, American Economic Association, vol. 103(5), pages 1797-1829, August.
    25. Stephanie Aaronson & Tomaz Cajner & Bruce Fallick & Felix Galbis-Reig & Christopher Smith & William Wascher, 2014. "Labor Force Participation: Recent Developments and Future Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(2 (Fall)), pages 197-275.
    26. Tammy Schirle, 2008. "Why Have the Labor Force Participation Rates of Older Men Increased since the Mid-1990s?," Journal of Labor Economics, University of Chicago Press, vol. 26(4), pages 549-594, October.
    27. David H. Autor & David Dorn & Gordon H. Hanson, 2015. "Untangling Trade and Technology: Evidence from Local Labour Markets," Economic Journal, Royal Economic Society, vol. 0(584), pages 621-646, May.
    28. Henry S. Farber, 2017. "Employment, Hours, and Earnings Consequences of Job Loss: US Evidence from the Displaced Workers Survey," Journal of Labor Economics, University of Chicago Press, vol. 35(S1), pages 235-272.
    29. Ilyana Kuziemko & Jessica Pan & Jenny Shen & Ebonya Washington, 2018. "The Mommy Effect: Do Women Anticipate the Employment Effects of Motherhood?," NBER Working Papers 24740, National Bureau of Economic Research, Inc.
    30. David H. Autor & Mark Duggan & Kyle Greenberg & David S. Lyle, 2016. "The Impact of Disability Benefits on Labor Supply: Evidence from the VA's Disability Compensation Program," American Economic Journal: Applied Economics, American Economic Association, vol. 8(3), pages 31-68, July.
    31. Claudia Olivetti & Dana Rotz, 2017. "Changes in Marriage and Divorce as Drivers of Employment and Retirement of Older Women," NBER Chapters, in: Women Working Longer: Increased Employment at Older Ages, pages 113-155, National Bureau of Economic Research, Inc.
    32. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
    33. Shigeru Fujita, 2011. "Effects of extended unemployment insurance benefits: evidence from the monthly CPS," Working Papers 10-35, Federal Reserve Bank of Philadelphia, revised 2011.
    34. Rebecca M. Blank & Heidi Shierholz, 2006. "Exploring Gender Differences in Employment and Wage Trends Among Less-Skilled Workers," NBER Working Papers 12494, National Bureau of Economic Research, Inc.
    35. Claudia Goldin & Lawrence F. Katz, 2017. "Women Working Longer: Facts and Some Explanations," NBER Chapters, in: Women Working Longer: Increased Employment at Older Ages, pages 11-53, National Bureau of Economic Research, Inc.
    36. Mastrobuoni, Giovanni, 2009. "Labor supply effects of the recent social security benefit cuts: Empirical estimates using cohort discontinuities," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1224-1233, December.
    37. Katharine G. Abraham & Melissa S. Kearney, 2018. "Explaining the Decline in the U.S. Employment-to-Population Ratio: a Review of the Evidence," NBER Working Papers 24333, National Bureau of Economic Research, Inc.
    38. Nucci, Francesco & Riggi, Marianna, 2018. "Labor force participation, wage rigidities, and inflation," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 274-292.
    39. John G. Fernald & Robert E. Hall & James H. Stock & Mark W. Watson, 2017. "The Disappointing Recovery of Output after 2009," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(1 (Spring), pages 1-81.
    40. Claudia Foroni & Francesco Furlanetto & Antoine Lepetit, 2018. "Labor Supply Factors And Economic Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(3), pages 1491-1510, August.
    41. Ekaterina Jardim & Mark C. Long & Robert Plotnick & Emma van Inwegen & Jacob Vigdor & Hilary Wething, 2017. "Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle," NBER Working Papers 23532, National Bureau of Economic Research, Inc.
    42. Lincoln H. Groves, 2016. "Welfare Reform and Labor Force Exit by Young, Low-Skilled Single Males," Demography, Springer;Population Association of America (PAA), vol. 53(2), pages 393-418, April.
    43. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
    44. Harry J. Holzer & Paul Offner & Elaine Sorensen, 2005. "Declining employment among young black less-educated men: The role of incarceration and child support," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 24(2), pages 329-350.
    45. Giovanni Peri & Kevin Shih & Chad Sparber, 2016. "STEM Workers, H-1B Visas, and Productivity in US Cities," World Scientific Book Chapters, in: The Economics of International Migration, chapter 9, pages 277-307, World Scientific Publishing Co. Pte. Ltd..
    46. David Card & Alan Krueger, 1994. "The Economic Return to School Quality: A Partial Survey," Working Papers 713, Princeton University, Department of Economics, Industrial Relations Section..
    47. Eissa, Nada & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup, 2008. "Evaluation of four tax reforms in the United States: Labor supply and welfare effects for single mothers," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 795-816, April.
    48. Willem Van Zandweghe, 2012. "Interpreting the recent decline in labor force participation," Economic Review, Federal Reserve Bank of Kansas City, issue qi, pages 5-34.
    49. David Card, 2012. "Comment: The Elusive Search For Negative Wage Impacts Of Immigration," Journal of the European Economic Association, European Economic Association, vol. 10(1), pages 211-215, February.
    50. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1335-1374.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mrr:papers:wp385. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (MRRC Administrator). General contact details of provider: http://edirc.repec.org/data/isumius.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.