The monthly employment reports show that the employment level in the US is gradually recovering. However, the labor force participation rate, the proportion of the working-age population (16 years and older) that is employed or looking for work, remains the lowest since the 1970s. As of December 2021 it was of 61.9% (compared to 63.4% in February 2020) and has remained at similar levels for almost a year and a half.
The recent trend of workers leaving their jobs or the workforce altogether has been dubbed the “Great Resignation.” According to the Bureau of Labor Statistics (BLS) Survey of Job Vacancy and Job Turnover, the quit rate, the fraction of employed workers who left their jobs voluntarily, hit an all-time high of 3% in November 2021. Additionally, 6.3 millions of workers left the labor force in December; this figure was similar, if not slightly higher, throughout 2021.
Trends like these have policymakers wondering where all the workers have gone. In this article, we dive into the data to explain what those outside of the workforce are doing.
Activities of those not in the labor force
Our data is aggregated from monthly individual survey responses from the Current Population Survey (CPS), which is one of the underlying sources of data in the BLS monthly job reports. When respondents are not in the labor force, they are asked to report their main non-work activity:
- Retired
- unable to work
- At school
- Taking care of the house/family
- disabled
- Sick
- Other
The three figures below show the proportion (six-month moving average) of the non-active population that is in each of the seven activities. The most common activities are retirement, schooling and housework/family care. However, the general trends in these three most common activities are quite different. The proportion of people in retirement has been steadily increasing, as a consequence of the aging of the general US population, while the proportion in school has been declining. The share taking care of the household or family had also been declining, but then increased during the pandemic and now remains well above where it would have been if it had continued to decline at the same rate.
Composition of the US Working-Age Population Not in the Labor Force: By Percentage of Activity
SOURCES FOR THE ABOVE THREE FIGURES: Current Population Survey and authors’ calculations.
NOTES TO THE ABOVE THREE FIGURES: Percentages are six-month moving averages. Data starts in March 2015 and ends in September 2021. Gray shading indicates the COVID-19 recession.
We now explore further what changes have occurred in the “retirement” and “home/family care” categories. These activities are frequently cited as the reasons people have not returned to work during the pandemic.
Retirement
Has the pandemic caused more retirements than in previous years? An obvious first place to look is the proportion of the population that reports being retired. The figure below shows how this has evolved in recent years. As Miguel Faria-e-Castro also points out 2021 Economic Synopsis rehearsal, there has been an acceleration in retirements during the pandemic. He estimates that if the share of retired people had continued to rise at the same rate as before the pandemic, there would be around 2.4 million fewer retirees than there are now.
Retirees as a percentage of the US working-age population
SOURCES: Current population survey and authors’ calculations.
NOTES: Percentages are six-month moving averages. Data starts in March 2015 and ends in September 2021. Gray shading indicates the COVID-19 recession.
Do these extra retirements differ from previous retirements? One possibility is that the pandemic has induced people to retire at earlier ages, which means we should see a change in the age composition of new retirees.
The figure below plots the proportion of new retirees (those who left the labor force to retire in a given month) who are under the age of 65. Over the last decade, the fraction of “young” retirees had been in decline, but experienced a modest increase. reversal in 2021 to 2015-16 levels, from 44.5% to 46.7%. This suggests that age may have been a minor factor more recently, although pinpointing which retirements would not have occurred in the absence of the pandemic would require more careful analysis.
Percentage of new retirees under 65 years of age
SOURCES: Current population survey and authors’ calculations.
Taking care of the house/family
Next, we move on to household and childcare considerations. Early in the pandemic, many people, especially women, were forced to leave their jobs when schools and day care centers were closed. To what extent has the pandemic produced a persistent shift in the balance between work and childcare? The following figure plots the proportion of the population reporting being out of the labor force due to home care/family care. It trended downward until 2020, after which it spiked and has remained high.
Percentage of the US working-age population not in the labor force due to home/family care
SOURCES: Current population survey and authors’ calculations.
NOTES: Percentages are six-month moving averages. Data starts in March 2015 and ends in September 2021. Gray shading indicates the COVID-19 recession.
Gender differences in care at home/family care
To further quantify the shift from work to home care/family care, we look at people who leave the labor force in a given month and then calculate the proportion who leave to “care for home/family”. The following figure plots this percentage for both men and women.
Household/Family Caregivers as Proportion of Labor Force Dropouts: By Gender
SOURCES: Current population survey and authors’ calculations.
NOTES: Percentages are six-month moving averages. Data starts in March 2015 and ends in September 2021. Gray shading indicates the COVID-19 recession.
The different levels of the two series highlight the different tendencies for men and women to enter home care/family care: conditional on leaving the labor force, 37% of women enter home care/family care, versus about 16% of men. It turns out that for both genders, this trend increased during 2020; that is, both genders became more likely to be occupied with home care/family care concerns during the pandemic. Since the beginning of 2021, this trend has decreased again.
As it stood in December 2021, 21.5% of women who did not participate reported being away for home and family care, compared to just 5.1% of men. These are little changed from the pre-pandemic figures of 20.8% and 4.2%, respectively, suggesting some limited lingering effects for both genders.
To conclude, our analysis of out-of-workforce activities in CPS reveals that shifts toward retirement and home care/kinship care have driven the labor force participation deficit. This squares well with the anecdotal evidence. Our findings also suggest that shifts are not limited to a certain age range for retirement or a certain gender for home care/family care.
References
final notes
- The survey category “not in the labor force” is divided into “retired”, “unable to work” and “other”. People who report “other” are asked a follow-up question with more options. These encompass the last six options: “at school”, “taking care of home/family”, “disabled”, “sick”, “other”, or “out of universe”.
- Over 16 years.
