The labor force participation rate in the U.S. has declined since 2007 primarily because of population aging and ongoing trends that preceded the Great Recession. The participation rate has evolved differently, and for different reasons, across demographic groups. A rise in school enrollment has largely offset declining participation for young workers since the 1990s.
The LFP rate in the U.S. peaked at 67.3 percent in early 2000, and has declined at a more or less continuous pace since then, reaching a near 40-year low of 62.4 percent in September 2015. In recent years, the LFP rate among prime-age men has been notably low. In 2015, Italy was the only O.E.C.D. country that had a lower LFP rate of prime age men than the U.S.
Participation in the labor force has been declining for prime age men for decades, and about half of prime age men who are not in the labor force (NLF) may have a serious health condition that is a barrier to work. Nearly half of prime age NLF men take pain medication on a daily basis, and in nearly two-thirds of these cases they take prescription pain medication.
Labor force participation has fallen more in areas where relatively more opioid pain medication is prescribed, causing the problem of depressed labor force participation and the opioid crisis to become intertwined.
The labor force participation rate has stopped rising for cohorts of women born after 1960. Prime age men who are out of the labor force report that they experience notably low levels of emotional well-being throughout their days and that they derive relatively little meaning from their daily activities. Employed and NLF women, by contrast, report similar levels of subjective well-being, but NLF women who are not primarily taking care of home responsibilities report notably low levels of emotional well-being.
Over the past decade retirements have increased by about the same amount as aggregate labor force participation has declined, and the retirement rate is expected to continue to rise.
A meaningful rise in labor force participation will require a reversal in the secular trends affecting various demographic groups, and perhaps immigration reform.
Among other findings, the research suggests that:
- Regional variation in opioid prescription rates across the U.S. is due in large part to differences in medical practices, rather than varying health conditions. Pain medication is more widely used in counties where health care professionals prescribe greater quantities of opioid medication, with a 10 percent increase in opioid prescriptions per capita is associated with a 2 percent increase in the share of individuals who report taking a pain medication on any given day. When accounting for individuals’ disability status, self-reported health, and demographic characteristics, the effect is cut roughly in half, but remains statistically significant.
- Over the last 15 years, LFP fell more in counties where more opioids were prescribed. Krueger reaches this conclusion by linking 2015 county-level opioid prescription rates to individual level labor force data in 1999-2001 and 2014-16. For more on the relationship between prescription rates and labor force participation rate on the county-level, visit these maps.
- In earlier research presented at the Boston Fed in 2016, Krueger found that nearly half of prime age men who are not in the labor force take pain medication on a daily basis, and that two-thirds of those men—or about 2 million—take prescription pain medication on a daily basis. In a 2017 follow-up survey to a subset of previous respondents, Krueger found that two-thirds of men not in the labor force and taking pain medication used Medicaid, Medicare, or Veterans Affairs health insurance to purchase prescription pain medication, with the largest group relying on Medicaid.
Chosen excerpts by Job Market Monitor. Read the whole story at Where have all the workers gone? An inquiry into the decline of the U.S. labor force participation rate