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posted on 29 March 2017

America's Missing Workers Are Primarily Middle Educated

from the Dallas Fed

-- this post authored by Alan Armen and Tyler Atkinson

The labor force participation rate has fallen since 2008, partly due to an aging population and despite a more highly educated one. After accounting for aging, those whose highest educational attainment is a high school diploma, some college or an associate degree have primarily driven the participation decrease.

Since the Great Recession, the labor force participation rate - the percent of people employed or looking for work - has fallen roughly 3 percentage points. Declining participation has downside implications for the long-run size of the economy. Policymakers are acutely interested in understanding what is behind the decline and what, if anything, can be done to slow it.

A well-documented explanation for the decline is that the population has gotten older and, therefore, is more likely to be retired. Results from studies of the effect of aging on participation have ranged widely, though aging typically poses a sizable downward impact. A less-often emphasized point, however, is that increases in educational attainment over the same period partially offset the impact of age and put upward pressure on the participation rate.

There is no consensus on what exactly has driven the decline in participation beyond what demographics can explain. Whatever the cause, it appears this decline is concentrated among those who have only a high school degree or some college education, while those with less than a high school education or a bachelor’s degree or higher are participating at a normal rate. Policies that S America’s Missing Workers Are Primarily Middle Educated by Alan Armen and Tyler Atkinson effectively target these middle-education groups by either increasing their participation rates or educational attainment levels could plausibly mitigate the overall labor force participation rate decline.

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Source: research/eclett/ 2017/ el1704.pdf

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