The U.S. labor market has changed drastically over the past 50 years. As the following figure shows, the U.S. labor force participation rate1 rapidly increased starting in the mid-1960s, peaked around 2000 and fell substantially afterward.
This trend is the result of many forces, some of them in opposition to each other. For example, male participation in the labor market has been steadily decreasing, while female participation increased drastically until 2000. In addition, the aging workforce and increasing number of youth pursuing higher education are also often cited as reasons for the recent decline in aggregate U.S. labor force participation.
These trends are not exclusive to the U.S. and reflect changes in social preferences for work and the pursuit of higher education across many countries. We compared labor force participation rates across eight developed countries since 1975 to better understand what is unique to the U.S. economy and what is not.
Despite the similar trends in youth, prime-age and pre-retirement participation rates, the U.S. is the only country in our sample experiencing a recent decline in the aggregate labor force participation rate. This is explained mostly by a larger-than-average drop in the labor force participation of prime-age males, a decrease in the participation of prime-age women and a lower-than-average increase in the participation of pre-retirement-age workers in the U.S. economy. Aging also played a role, as the share of the population between ages 25 to 54 (the group with the highest level of labor force participation) experienced a larger-than-average drop.