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Home Publications Blogs Beat the Press Urban Institute's Lack of Entry Won't Explain the Fall of Labor Force Participation

Urban Institute's Lack of Entry Won't Explain the Fall of Labor Force Participation

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Saturday, 11 January 2014 09:21

Brad Plummer reports on a study from the Urban Institute which purports to explain the drop in labor force participation as a story of fewer people entering the workforce after a period of being out of the workforce, as opposed to more people leaving. This explanation actually is not supported by the results shown in the study. 

The study finds only a very slight falloff in the entry rate for prime age men (Table 2), even though there has been a sharp falloff in their labor force participation rate. On the other hand it shows the sharpest declines in entry for older workers, who in fact have seen a decline in labor force participation. This suggests that the study's sample is not reflecting larger labor force conditions. (The study uses the Survey on Income and Program Participation, which has a considerably smaller sample size that the Current Population Survey that is conventionally used for labor market analysis. There is likely also a problem with people dropping out of the survey, who are likely to be a particularly large share of those dropping out of the labor force.)

It's also worth noting that their analysis only looked at the falloff in labor force participation rate in one year, from 2010 to 2011. In that year we saw a drop 0.6 percentage points of a total falloff of 2.1 percentage points for prime age women and 0.7 percentage points of a total falloff of 3.4 percentage points for prime age men.

Comments (2)Add Comment
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written by Mark Jamison, January 11, 2014 1:36
How much of the drop in labor force participation is due to Boomer retirements? Are there any figures indicating how many Boomer retirements were forced or involuntary?
I know I left the labor force when the Postal Service offered a buyout. It actually wasn't a very attractive deal but my job was going away in two years and those two years would have been hell since they were looking to downgrade my office as soon as I left. I had planned to work another three or four years. I've looked for something else but minimum wage at Wal-Mart isn't much of a choice.
Just wondering how the figures breakdown.
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written by JDM, January 11, 2014 7:48
A study like that which only looks at one year?! Sounds more like a high school semester report maybe. Certainly makes me wonder if the year was cherry-picked. In my reading Dean seems to imply this, but I may be reading that in.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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