from the Kansas Fed
— this post authored by and Thao Tran, Research Associate
The labor force participation rate of prime-age individuals (age 25 to 54) in the United States declined dramatically during and after the Great Recession. From 2008 to 2015, the share of prime-age individuals either working or actively looking for work decreased from 83.1 percent to 81.0 percent, the lowest rate since the 1980s.
In 2008, 21 million prime-age individuals did not participate in the labor force. By 2015, this number had risen to almost 24 million. Although the labor force participation rate of prime-age individuals has been increasing since mid-2015, it remains below its pre-recession level.
Prime-age individuals are in their most productive working years, and a decline in their labor force participation has important implications for the future of the labor market and economic growth. However, understanding the decline requires detailed analysis; aggregate statistics on labor force participation may mask differences in labor market outcomes by sex and educational attainment. Identifying these differences is crucial to both evaluating potential labor market implications and designing targeted policies to encourage labor force participation.
In this article, we use data from the U.S. Census Bureau’s Current Population Survey (CPS) to document recent changes in the labor force participation rates of prime-age individuals across sex and education levels during the Great Recession and the subsequent recovery. Our analysis yields two key findings. First, prime-age men and women without a bachelor’s degree experienced larger deteriorations in their labor force participation rates during the recession than their college-educated counterparts. These rates are still well below their pre-recession levels, likely due to the long-term shift in employment away from routine occupations and toward non-routine occupations. Second, only prime-age women with a bachelor’s degree have seen their labor force participation rate fully recover. Notably, although the prime-age participation rate of college-educated women has recovered to its pre-recession level, it still remains well below the participation rates of both college-educated and non-college-educated men. A greater share of women who report caring for the family as their reason for nonparticipation may explain this discrepancy.
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