Result
Total Labor Force: 0
Population Not in Labor Force: 0
How is Labor Participation Rate Calculated?
The Labor Force Participation Rate (LFPR) is a key economic indicator that measures the proportion of the working-age population that is currently in the workforce. Unlike the unemployment rate, which only looks at people actively seeking work, the participation rate helps economists understand how many people are contributing to the economy relative to the total available population.
The Formula
To calculate the labor force participation rate, you need two primary figures: the size of the Labor Force and the size of the Civilian Non-institutional Population.
Participation Rate = ( Labor Force / Civilian Non-institutional Population ) × 100
Step-by-Step Calculation Guide
- Determine Employed Persons: Count all individuals who currently have a job (full-time or part-time).
- Determine Unemployed Persons: Count all individuals who do not have a job but have actively looked for work in the past 4 weeks and are currently available to work.
- Calculate Total Labor Force: Add the Employed and Unemployed numbers together.
Labor Force = Employed + Unemployed - Identify Total Population: Find the total number of people aged 16 and older, excluding active-duty military personnel and people in institutions (like prisons or nursing homes).
- Divide and Multiply: Divide the Labor Force by the Total Population and multiply by 100 to get the percentage.
Example Calculation
Let's assume an economy has the following statistics:
- Employed: 150 million people
- Unemployed (Actively looking): 10 million people
- Civilian Non-institutional Population: 250 million people
First, we calculate the Labor Force:
150 million (Employed) + 10 million (Unemployed) = 160 million (Total Labor Force)
Next, we apply the formula:
(160 million / 250 million) × 100 = 64.0%
In this example, the Labor Force Participation Rate is 64.0%.
Why Does This Metric Matter?
The participation rate provides context to the unemployment rate. For example, if the unemployment rate drops, it sounds good. However, if the unemployment rate drops because people stopped looking for work (dropping out of the labor force entirely), that is actually a negative economic signal. The participation rate captures these "discouraged workers" by showing a decline in the percentage of the population engaged in the workforce.
Key Definitions
- Civilian Non-institutional Population: Persons 16 years of age and older residing in the 50 States and the District of Columbia, who are not inmates of institutions (e.g., penal and mental facilities, homes for the aged) and who are not on active duty in the Armed Forces.
- Labor Force: The sum of employed and unemployed persons.
- Not in Labor Force: Persons who are neither employed nor unemployed. This includes retirees, students, those taking care of home/family, and discouraged workers.