We hear a lot in the news these days about the historically low unemployment rate, but one figure we don’t hear about nearly as much is the labor force participation rate—the ratio between the size of the labor force and the size of the overall population for that age group, often grouped by cohort (i.e., Baby Boomers, Gen Y, etc.).
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A Look at the Labor Participation Rate
According to a recent Federal Reserve Bank of San Francisco (FRBSF) economic letter, the labor force participation rate among U.S. men and women between the ages of 25 and 54 has been declining for roughly the past 2 decades. At the same time, that rate has been rising in Canada over the same time period.
According to the FRBSF letter, “three-fourths of the difference between the two countries can be explained by the growing gap in labor force attachment of women.” And that gap can further be explained by extensive parental leave policies in Canada as compared to the United States, the letter says.
Should the United States Follow Canada’s Lead?
The letter predicts that if the United States could somehow match Canada in terms of the labor force participation rate of prime-age women, it could add 5 million prime-age workers to the American labor force.
The FRBSF argues that the best way to achieve this closing of the gap between ourselves and our neighbors to the north is through the adoption of more liberal employment and social policies that would make it easier for American women to remain in the workforce while raising children.
While we focus on the low unemployment rate, it’s important not to ignore other important statistics, such as the labor force participation rate. Because the unemployment rate only measures unemployment among those actively seeking employment, it’s easy to overlook large segments of the population that are not working but may be interested in working and looking for work if certain conditions were in place.
A job market more conducive to raising children while working appears to be one of those conditions.