Labor Force Participation Rate
Labor force participation rate is the percentage of working age population that is part of the labor force. It is a measure of what proportion of a country's population is employed or actively looking for employment. Higher the labor force participation rate, more of the country's population is interested in working.
In US, the Bureau of Labor Statistics (BLS) defines labor force participation rate as “the labor force as a percent of the civilian noninstitutional population.” Labor force is defined as: “all persons classified as employed or unemployed.” Employed persons are persons aged 16 years or older, who work for an employer or are self-employed, and excludes people who work as volunteers and people engaged in self-service/homemaking. Unemployed persons are those jobless persons who are aged 16 year or older, were available for job in last four weeks, and had made specific efforts to find a job at any time during that period.
The BLS provides a database of labor related data. You can extract numbers by submitting a customized query here.
Formula
$$ \text{Labor Force Participation Rate}\\=\frac{\text{Labor Force}}{\text{Working Age non}\text{-}\text{institutionalized Population}} $$
Since labor force is the sum of employed and unemployed,
$$ \text{Labor Force Participation Rate}\\=\frac{\text{Employed}+\text{Unemployed}}{\text{Working Age non}\text{-}\text{institutionalized Population}} $$
Examples
Example 1
Base on the BLS records, US non-institutionalized population in December 2012 was 244,350 thousand. Employed persons were 143,060 thousand and unemployed persons were 11,844 thousand. Find the labor force participation rate.
$$ \text{Labor Force Participation Rate}\\=\frac{\text{143,060} + \text{11,844}}{\text{244,350}}\\=\text{63.39%} $$
Example 2
Orsinia has adopted the framework used by the US Bureau of Labor Statistics to calculate its labor force statistics. Following information is extracted from a database maintained by the country's ministry of labor:
| Total population | 24,512,311 |
| Military personnel | 98,539 |
| People below 16 years of age | 4,240,102 |
| People in elderly care centers | 1,232,130 |
| People who didn't look for job in last 4 weeks | 831,304 |
| House wives whose sole activity is home-making | 3,424,204 |
| Volunteers | 313,200 |
| Self-employed people | 3,423,042 |
Calculate labor force participation rate.
The calculation is given below. The labor force is calculated indirectly by subtracting the people who are by definition neither employed nor unemployed.
| Total population | 24,512,311 |
| Military personnel | (98,539) |
| People below 16 years of age | (4,240,102) |
| People in elderly care centers | (1,232,130) |
| Non-institutionalized civilian population (A) | 18,941,540 |
| Non-institutionalized civilian population (A) | 18,941,540 |
| House wives whose sole activity is home-making | (3,424,204) |
| People who did not look for job in last 4 weeks | (831,304) |
| Volunteers | (313,200) |
| Labor force (B) | 14,372,832 |
| Labor force participation rate (B/A) | 75.88% |
by Obaidullah Jan, ACA, CFA and last modified on