Labor Force

The labor force is the total number of people in a national or regional population who are able and willing to work. This important variable is used to calculate other variables, such as the labor force participation rate, the unemployment rate, and total labor productivity in an economy, for purposes of economic policy formulation. Labor productivity is the measure of amount of real gross domestic product produced by a unit of labor. It is useful for estimating the standard of living, or the availability of resources for individuals in an economy. People who are under 16 years old and people in the military are not counted as part of the labor force, nor are people who are retired, incarcerated, full-time students, taking care of family members or children, or disabled to the extent that they are unable to work. Thus, the total labor force equals the number of people working plus those who are unemployed. Labor force statistics are usually compiled from government surveys of the various sectors of the economy, including manufacturing, agriculture, and forestry. They include all categories of workers, including full-time workers (those who work 40 or more hours a week at one job), contributing family workers (e.g., a person who works part-time and takes care of their family with the rest of their time), casual workers (people who work irregularly and are in and out of the job force), and multiple jobholders (workers who contribute labor to more than one place of employment).

A labor force is characterized by the variety and levels of skill of its members, as well as by their age, their sex, and in countries where appropriate to track this, its ethnic composition. The labor force can increase or decrease with the size of the total population and with changes in its age distribution.

Many advanced economies (notably Japan and some European countries) are now experiencing severe population aging that is reducing the proportion of the population that is working. These countries are also experiencing an increasing age dependency ratio (as defined by the United Nations), which is the sum of the number of people under age 15 and over 64 divided by the number of working-age people, or those ages 15 to 64. This is important to predict the economic futures of countries that may not be able to fill the jobs needed by the economy. In Japan, the age dependency ratio is close to 64%; for every three workers, there are two dependents. In China, because of the former one child policy, this problem will become particularly acute in the decades to come. China today has a large population, but its population did not continue to grow, so there may be future difficulty in finding people to fill jobs. The labor force also grows or shrinks as the number of working-age people who make themselves available for work increases or decreases. During World War II and the long economic boom that followed it, many women who had not previously been in paid employment joined the labor force.

The labor force participation rate (LFPR) is the proportion of people who are willing and able to work expressed as a percentage of the total population, which includes those who are unwilling or unable to work. This includes only the non-institutionalized population, that is, those who are not in an institution, such as an inpatient care facility. Working age is defined as 16 or older by the Bureau of Labor Statistics (BLS) in the United States, but some countries set the lower age limit at 15 and have an upper age limit. The labor force participation rate indicates the size of the supply of labor, the total hours that workers want to work at a specific amount of pay, available to produce goods and services in an economy. In the United States, the BLS defines the labor force participation rate as the percentage of the non-institutional civilian population age 16 or older that is employed or unemployed (looking for work), including people who are self-employed. The labor force does not include people who are capable of work but are not employed or looking for work. For example, the labor force does not include discouraged workers who have been unemployed for a long time and have decided to discontinue their search for work.

Policymakers use the labor force participation rate to estimate the potential output of an economy, or the total quantity of goods created, as well as to formulate employment policies, determine training needs, and calculate the potential cost of social security and retirement pensions.

The labor force participation rate of specific categories of worker can help identify problems that such groups face. For example, in many countries the labor force participation of women is extremely low and may vary with age and social status, as well as with fertility rates and educational levels. In Indonesia the labor force participation rate of educated women in 2000 was 94.4%. In Canada, for the same category, the rate was 58.9%. Thus, more educated women in Canada do not join in the workforce, perhaps because higher education for women is more compulsory in Canada than Indonesia. Labor force participation rates for people ages 15-24 tend to be affected by the availability of educational opportunities. For older workers the rates have been found to be linked to attitudes toward retirement and the existence of retirement pensions. In the 21st century, the labor force participation rate in developed countries like the United States has been falling, especially since the 2007-2009 economic crisis.