The US Labor Force is Reconstituting Before Our Eyes
Most columnists keep an eye on the labor force participation rate (green line above), which is generally heading in a downward direction. Google even has a featured snippet when you search for it. Here’s the technical definition from the BLS:
Employed persons (Current Population Survey)
Persons 16 years and over in the civilian noninstitutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees; worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family; and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs. Each employed person is counted only once, even if he or she holds more than one job. Excluded are persons whose only activity consisted of work around their own house (painting, repairing, or own home housework) or volunteer work for religious, charitable, and other organizations.
That’s a pretty solid definition, but once we aggregate a population into that classification, we can start missing some nuance. As humans, we often assume that when one set of definitions is held constant against a population, that other classifications or definitions pertinent to that population also remain constant. When it comes to the age of the labor force, it’s definitely in flux.
The BLS is projecting 16–24 year olds will only make up 11% of the labor force in 2022 as opposed to 17% in 1992, and 55+ workers will make up 26% of the labor force in 2022, as opposed to 12% in 1992. We see that trend in ZipRecruiter data as well. In 2016, 20% of our job seekers are above 55, and nearly 40% are over 45 years old, markedly higher than in previous years.
I’m focused on this definition of Labor Force because it results in an unintuitive graph disagreement. While Labor Force participation is declining, employment : population ratio (red line above) is going up slightly. Intuitively, these should reflect roughly the same data, and yet the static definition overlaying a changing population makes them start to diverge.
As the American workforce continues to grow and reconstitute, we’re going to have to redefine “labor force” to match. It’s going to look a lot older and less well paid than previous older workers. Service jobs as an industry are continuing to grow, with 81% projected in 2022 over 76% in 2002. To quote the BLS projection again:
Service-providing sectors are projected to capture 94.6 percent of all the jobs added between 2014 and 2024. Of these 9.3 million new service sector jobs, 3.8 million will be added to the healthcare and social assistance major sector.
We have an aging population, and our workforce is beginning to reflect that. It’s worth remembering that when discussing things like minimum wage, which many intuitively assume is a uniquely youthful problem. 18% of minimum wage workers are 45+, and if current trends continue, that share could grow into the future.
