For Immediate Release: June 2, 2006
Contact: Debi Kar, 202-387-5080
Washington, D.C. - The Center for Economic and Policy Research (CEPR) has released an issue brief examining the sharp decline in labor force participation that has been a striking feature of the recent recession and subsequent recovery ahead of Friday's release of the May employment report.
There has been an extraordinary falloff in the percentage of workers who are employed. The most recent data shows that the share of the adult population who hold jobs stands at 62.2 percent. If the employment to population ratio, or EPOP, was as high today as at its 2000 peak of 64.9 percent, it would correspond to another 6 million employed workers.
While some analysts have suggested that the decline in labor market participation is a positive development because it is occurring mostly among mothers, the data do not support this story.
If a strong labor market led to more mothers staying home, this would have occurred during the economic boom of the late 1990s. However, the opposite is true. Mothers' labor force participation grew until the end of the boom, at which point it began to decline.
Labor force participation among prime age workers (ages 25 to 45), as measured by the employment to population ratio (EPOP), in the two years prior to the downturn (1998-1999) shows a sharp decline, for both men and women, and both for women with and without children. Prime age workers have sharply lower employment rates in 2003 regardless of their gender and whether they have children. Given that women--and especially mothers--saw larger increases in their EPOPs during the late 90s, compared to men, it makes sense that they would see a larger decline during the downturn.
Examining employment rates and wage growth for people between the ages of 18 and 30 reveals that the EPOP ratio actually dropped more for men than for women. If the cause of declining labor force participation was mothers who were dropping out of the work force to concentrate solely on child rearing, then the drop in labor force participation should have been higher for that age bracket given that nearly 60 percent of all first births are to mothers aged 18 to 24.
More rapid wage growth for the men remaining in the work force would be an expected feature of a prosperous economy that is making it easier for women to stay home with their young children. However, wage growth fell sharply with the onset of the recession in 2001, falling to an annual rate of just 0.3 percent for both men and women. Real wages are currently growing less rapidly than in the boom during the late 90s. Thus it is unlikely that more families are feeling sufficiently prosperous such that mothers of young children no longer have to seek paid employment.
The argument that the sharp falloff in labor force participation rates is attributable to the voluntary decision of mothers to stay home with their young children is completely contradicted by the data. The falloff in labor force participation among men is comparable to the falloff among women, and there is little difference in the decline between women with children and women without children. Further, slower wage growth for men does not make it easier for women to give up their jobs.