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The Bureau of Labor Statistics defines the labor force participation rate as the percentage of civilian noninstitutional population 16 years old and over either working or actively seeking work.[1] However, when comparing one region to another, this may not be the best metric to use.
The participation rate is an important indicator of the health of a labor market.[2] While employment and unemployment numbers are key labor force metrics, the participation rate adds context to these numbers by comparing the number of employed and unemployed to the total population.
By age cohort, the population 25-54 has the highest participation rate. Above age 55, the participation rate begins to decline, especially from age 60 to 70. The participation rate is also lower prior to age 25, as many in this cohort are in school.[3]
While measuring participation of the population 16 years and over has important uses, limiting the metric to “prime-age” workers (age 25-54) may be a better choice for other applications.
For example, suppose you are comparing the economic health of several U.S. metropolitan areas (MSAs) and one of the metrics you choose is the participation rate for age 16+. If some of the metros in your group have especially large older or younger age cohorts, those metros will likely have lower participation rates due to their population age mix, rather than due to their economic health.
The below table has fifteen U.S. metros that all have lower than average labor force participation rates for age 16+. However, they also have higher-than-average participation rates for prime-age workers.
| Region | Age 16+ | Age 25-54 |
|---|---|---|
| USA | 63.3% | 81.6% |
| Naples-Immokalee-Marco Island, FL MSA | 53.1% | 83.1% |
| Barnstable Town, MA MSA | 59.8% | 86.6% |
| Bloomsburg-Berwick, PA MSA | 57.2% | 83.3% |
| Hilton Head Island-Bluffton-Beaufort, SC MSA | 56.6% | 81.9% |
| Ocean City, NJ MSA | 58.3% | 83.3% |
| Ithaca, NY MSA | 58.5% | 82.3% |
| Bay City, MI MSA | 58.1% | 81.9% |
| Asheville, NC MSA | 59.0% | 81.8% |
| Kokomo, IN MSA | 59.6% | 82.3% |
| Midland, MI MSA | 60.5% | 83.1% |
| Corvallis, OR MSA | 59.3% | 81.9% |
| Chambersburg-Waynesboro, PA MSA | 62.8% | 85.3% |
| Champaign-Urbana, IL MSA | 63.2% | 85.6% |
| Tampa-St. Petersburg-Clearwater, FL MSA | 59.6% | 81.9% |
| Harrisonburg, VA MSA | 63.0% | 85.3% |
| Source: American Community Survey 2013-2017 and JobsEQ® | ||
Two factors are clearly playing a role in the flip in these fifteen MSAs. The first is the mix of population age 65 and over. For the time period shown here (2013-2017), 14.9% of the U.S. population was age 65 and over. Eleven of the MSAs in this list had larger percentages of population age 65+, especially Naples-Immokalee-Marco Island (30.2%) and Barnstable Town (28.5%).
The second factor is on the other end of the spectrum, having a higher population mix in the 16-25 cohort—in these cases driven by having one or more large universities or colleges. This was a prominent factor for the metros of Ithaca (Cornell University and Ithaca College), Corvallis (Oregon State University), Champaign-Urbana (University of Illinois and Parkland College), and Harrisonburg (James Madison University).
[1] https://www.bls.gov/cps/cps_htgm.htm#definitions
[2] https://equitablegrowth.org/declining-labor-force-participation-rate-causes-consequences-path-forward/
[3] https://www.bls.gov/emp/tables/civilian-labor-force-participation-rate.htm