Tuesday, June 05, 2007

Labor force participation...

Having a new baby in my house is putting a serious crimp on my blog reading. But anyway, I came across this from Macroblog on labor force participation. I thought it was first rate analysis, as per usual from that first rate blog. I won't rehash it here, you should go to his site and give him more hits.

A couple random thoughts on the subject:

  • We have to accept that the labor force participation rate will be declining over the next couple decades. The aging population assures this, I think. We should not misinterpret this as despondent workers or general economic weakness.
  • The declining labor participation of teenagers is logical to me. If more are in school, fewer are working. I don't know how the DOL counts part-time employees.
  • Some of the long-term trends that resulted in greater labor force participation in the last 2-3 decades or so are probably ending. For example, David's graphs show greater participation among the 55+ group, which likely reflects improved health of older workers. But that trend can't continue indefinitely. We aren't headed for a future where 80-year olds are a major part of the labor force. At least not soon.
  • Also in the 1960's and 1970's, the participation of women greatly increased, but this appears to have leveled off.

But what are the consequences for interest rates? Beats me.


Dr DSC said...

I'm not sure I have a good response to this, but a first thought is, doesn't Europe have a serious problem with the employment of their younger population? Perhaps it would be good to refer to their situation?

Deborah said...

I wonder if the decline of teens is about the reduced buying power of wages. I'm pretty sure minimum wage has half the buying power today as it did when I was a teen.

TDDG said...

I really think the teen thing is about more people going to school. I have a hard time believing that a decline in teenage labor participation is going to create a long-term negative economic trend. Its a group that was overwhelmingly part-time employed to begin with.

I don't buy the wage thing either. The marginal value of a dollar to a teenager is high, unless his/her parents are just giving him/her money, in which case its low. That laborer is a price taker and happy to take the price.