Labor force participation and educational attainment in the United States
The objectives of this paper are twofold. I first describe changes in labor force participation for both men and women 25 years of age and older, 1994 - 2014, focusing on educational attainment. I then decompose changes in aggregate labor force participation by changes in behavior and by changes in population shares.
Data and Methods
Utilizing data from the U.S. Department of Labor, I hypothesize that falling labor force participation rates in the U.S. can be more clearly understood by decomposing aggregate labor force participation rates (LFPRs) into weighted changes in behavior (LFPR) as well as each educational cohort’s population share.
That is
[1] LFPRt = Σ [p i t LFPR i t]
[2] LFPRt - LFPRt-1 = Σ {[ LFPRit - LFPRit-1] p i t + [p i t - p i t-1 ] LFPRit-1]}
Where t = time
And where i = Educational Attainment
- Less than highschool:
- Highschool:
- Some college or Associate’s Degree: and University Degree or greater
And where p is the cohort’s population share
Expected Results
Since individuals with the higher levels of educational attainment demonstrate the lowest percent decline in weighted LFPR over the past 20 years, the propensity to acquire greater years of education will arrest, in part, the decline in aggregate LFPRs; that is, changes in educational attainment rather than changes in behavior that have dominated changes in aggregate labor force participation rates.
Discussion
With falling labor force participation rates over the past 20 years, the rise in educational attainment may offset the deleterious effects falling labor force participation rates have on economic growth in the United States. Empirical analysis can shed light on the role human capital plays in understanding changes in aggregate labor force participation rates and provides a basis for policy recommendations.