Author: Steven Pennington
In January 2000, the national labor force participation rate was 67.3 percent. Labor force participation has fallen fairly steadily since then to a low of 62.7 percent in December 2014. Throughout this period, individuals from low-income households have been the least likely to participate in the labor force. However, Bloomberg Businessweek recently pointed to rising labor force participation rates among workers in low-income households, citing a recent analysis from Nicolas Petrosky-Nadeau, a senior economist at the Federal Reserve Bank of San Francisco, and Robert Hall, an economist at Stanford.
From the Bloomberg article: “Low-income families are the only ones whose participation rate has risen. The average for families in the lowest tenth of households by income rose by 11 percentage points over a 13-year period, to just under 44 percent. The participation rate of families in the top tenth of incomes fell by a little more than 3 percentage points, to just under 80 percent. To put it simply, the poor have been stepping forward while the rich have been stepping back.
Petrosky-Nadeau and Hall write that teenagers had a lot to do with this trend. The LEAD Feed has covered declining youth labor force participation, driven by increased school enrollment, and the authors of this new report write that teenagers saw huge declines in participation in both lower and higher income households. However, “[t]he most telling finding for teenagers is that…the decline in participation was greater in the more prosperous families.
This analysis suggests that labor force participation changes are likely to be explained differently for people in different situations. Petrosky-Nadeau and Hall write that “[m]ost of the decline in participation occurred among teenagers and young adults. The finding that these effects tend to be larger in more prosperous families points strongly away from much of a role for rising influence of benefit programs, because these programs, especially food stamps, are only available to families with incomes well below the median.”