Useful Stats: Labor force participation by state; overall rate continues decline

An aging, more diverse workforce is what the Bureau of Labor Statistics foresees in the coming decade, with a declining participation rate, which may in turn restrict economic growth. The new projections released this week echo the downward trend in the rate of labor force participation since the peak of 67.3 percent in early 2000. While recent trends show an increasing level of participation among the 55+ crowd, there has been a decreasing level of participation among 16 to 24-year-olds as school enrollment has increased, as well as a continuing decline among the prime working-age cohort of 25 to 54-year-olds.

An SSTI analysis of the labor force participation rate of the prime age workers for each state revealed a great amount of variation among the states. The map below shows the participation rate for this cohort averaged out over 2014-2016 to account for yearly fluctuations. The five states with highest 2014-2016 average labor force participation rate for those aged 25 to 54 are Wisconsin (88.4 percent), Minnesota (88.1 percent), Iowa (87.9 percent), Nebraska (87.4 percent) and North Dakota (87.1 percent). West Virginia had the lowest percentage of prime working age participation at 72.1 percent average over 2014-2016, followed by Mississippi (74.8 percent), Alabama (76.2 percent) New Mexico (77.0 percent) and Arkansas (77.8 percent). The labor force participation rate is defined as the civilian, non-institutional population either working or looking for work in the last four weeks.

Forces affecting participation varied

While the aging population is a strong factor in the declining numbers of the overall labor force, the number of retirees in the 25 to 54 age group is less than 2 percent, except in Alaska (2.0 percent), Nevada (2.3 percent) and Florida (2.4 percent). And while the downward trend is not new, some of the theories trying to explain the decrease in participation among that age group are. A September report from the Federal Reserve Bank of Cleveland explored the question of whether the opioid epidemic could be large enough to have an impact on the labor force. Although the report notes that the drug usage is difficult to measure, it called the amount of opioids that have been prescribed “alarming.” While not drawing conclusions, the study maintains that the relationship between drug use and the labor market warrants further study.

Alan B. Krueger, a Princeton University professor, authored a paper on the topic that was published this fall as part of the Brookings Papers on Economic Activity. In Where Have All the Workers Gone? An Inquiry into the Decline of the U.S. Labor Force Participation Rate, Krueger finds “… 40 percent of [national labor force] prime age men report that pain prevents them from working on a full-time job for which they are qualified, and that nearly two-thirds of the men who take pain medication report taking prescription medication. It is also shown that generational increases in labor force participation that have historically raised women’s labor force participation over time have come to an end, and the U.S. can no longer count on succeeding cohorts of women to participate in the labor market at higher levels than the cohorts they are succeeding.”

Krueger writes that the decline in overall labor force participation is following historic trends and that “Given the pre-existing downward trend in participation for most demographic groups and the aging of the U.S. population, stabilization in the labor force participation rate for a time may represent the best one could expect for a cyclical recovery. If a cyclical recovery in labor force participation is unlikely, then a reversal of secular trends toward declining labor force is the only way to achieve an increase in labor force participation.”

SSTI took a look at the numbers of jobless adults, ages 25-54, over the 2014-2016 period. The data below are broken out by state and the number of those who are jobless but have looked for work in the past four weeks (the unemployed); those that want to work but have not looked recently; those who have indicated that they do not want to work; those that say they are unable to work; and, those who are retired.

Among the jobless adults, three states have nearly twice the 5.4 percent national average of those who say they are unable to work: Alabama (10.4 percent), Mississippi (10.5 percent) and West Virginia (12.3 percent). Another three exceed 9 percent: Kentucky (9.3 percent), Maine (9.4 percent) and Arizona (9.5 percent).

The five states with the highest combined percentage of those who said they are unable to work (but are not institutionalized) with those who were jobless and able but were not looking for work, are West Virginia (24.5 percent), Mississippi (21.7 percent), Alabama (20.8 percent), Arkansas (19.3 percent), and New Mexico (18.8 percent).

Notes about the data

All data is from the Census Bureau’s Current Population Survey. State-level data on labor force non-participation reasons were accessed through IPUMS-CPS, a project of the University of Minnesota. These figures represent extrapolations of weighted survey responses, and while three years’ worth of data were used in this report to help broaden the samples, caution should be used when making specific state-to-state comparisons. Definitions of various labor force and employment variables were calculated according to the Bureau of Labor Statistics glossary.

Labor Force Participation 2014-2016.xlsx