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Keeping US Workers in the Game

With unemployment at a near-historic low, US policymakers might think they don't need to worry about the state of the American workforce. But they would be wrong: without far-reaching measures to expand opportunities for education and reskilling, severe skilled-labor shortages will become inevitable.

BERKELEY – Though the unemployment rate and jobless claims are currently lower than at any point since 1969, the US economy is still facing labor-market challenges that cannot be ignored. One stands out: the long-term decline in the US labor-force participation rate (LFPR) – a key factor in future growth.

In the late 1960s, 97% of all prime working-age men (25-54) participated in the labor force, but by 2018 their participation dropped to 89%, driven by the decline in labor-force participation of non-college educated men. Similarly, after steady gains, the participation rate for prime working-age women peaked at 77% in 1997, stagnated until 2000, fell during the Great Recession, recovered somewhat after 2015, and was 75% in 2018.

The trends in the United States differ from those in other advanced industrial economies. For example, using a broader age group (15-64), the male LFPR stabilized in Canada and the United Kingdom after falling between 1990 and 2000, while it declined further in the US. In 2018, the US rate was 78%, while the rate in both Canada and the UK stood at 82%. Trends in the female LFPR also varied across countries. Using this broader measure (15-64), the US female participation rate peaked at 70% in 1997 and fell to 67% by 2018. In sharp contrast, the female rates in both Canada and the UK have increased gradually since the 1990s, hitting peaks of 75% in Canada and 73% in the UK in 2018.

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