Our labor force participation rate calculator aims to help you calculate the labor force participation rate of an economy. This metric will help you assess the active labor force within an economy.

This article will explain what the labor force participation rate is and how to calculate it using the labor force participation rate formula. Moreover, we will also demonstrate some examples to help you better understand the metric.

What is the labor force participation rate? The labor force participation rate definition

The labor force participation rate is one of the most famous metrics used to measure an economy's active workforce. We define it as the percentage of the working-age population currently active in the job market. Historically, the global labor force participation rate has been around 60% but has experienced a continuous decline in recent years.

Unlike unemployment rate, which tells you the percentage of the population that currently does not have a job, the labor force participation rate includes the unemployed population. It means that the labor force participation rate includes both the people who are currently employed and the people who are unemployed but are still active in the job market by actively seeking employment.

Now, let's look at how to find the labor force participation rate.

The labor force participation rate calculator and equation

Now that we understand the labor force participation rate definition, let's move to the labor force participation rate equation and how it's calculated. To do this, let's take Country Alpha as an example:

  • Name: Country Alpha;
  • Employed population: 5,500,000;
  • Unemployed population: 750,000; and
  • Working-age population: 7,250,000.

The labor force participation rate formula involves four steps:

  1. Determine the employed and unemployed population of the economy

The employed population is the number of people who are currently in employment, whereas the unemployed population is the number of people who are not employed but are actively looking for jobs. The unemployed population excludes noninstitutionalized populations that can't or won't seek employment, such as people who are in prison. Most governments provide this information. For example, you can find the employed population and unemployed population of the U.S. through the U.S. Bureau of Labor Statistics.

For our example, the employed population and unemployed population of Country Alpha are 5,500,000 and 750,000 respectively.

  1. Calculate the labor force of the economy

The labor force of an economy is defined as the sum of the employed population and the unemployed population. Hence, you can find the labor force using the following equation:

labor force = employed population + unemployed population

In our example, the Country Alpha's labor force is 5,500,000 + 750,000 = 6,250,000.

You can also calculate the unemployment rate using the equation below:

unemployment rate = unemployed population / labor force

The unemployment rate for this example is 750,000 / 6,250,000 = 12%.

  1. Determine the working-age population of the country

The working-age population of a country is defined as the total population of the country that is considered capable of working, based on a pre-determined age range. This information can again be found on the appropriate government website in most countries.

For Country Alpha, its working-age population is 7,250,000.

  1. Use the labor force participation rate equation

The last step is to calculate the labor force participation rate, LFPR. We can calculate this using the labor force participation rate equation below:

LFPR = labor force / working-age population

Hence, the LFPR for Country Alpha is 86.2%.

Don't worry if the process looks complicated. All you need is to put the relevant numbers into our labor force participation rate calculator and you will have your answer in no time.

What can the labor force participation rate formula tell us about the economy?

Now that we have understood how to calculate the labor force participation rate let's take some time to interpret the results:

  • As the labor force participation rate formula is the ratio of the labor force to the working-age population, the metric tells you what percentage of the working-age population is active in the economy. Generally, the higher the number, the more active the economy.

  • The labor force participation rate is also primarily affected by economic factors. For instance, in the long term, industrialization can create more employment opportunities, thus increasing the labor force participation rate. In the short run, the metric is mainly affected by business cycles. The labor force participation rate tends to decrease during economic recession.

  • Moreover, the labor force participation rate is also affected by the demographic of the economy. For example, an economy with an aging population will have a lower labor force participation rate.

FAQ

What is the working age population?

The working-age population is the population that is capable of working in an economy. This population is usually defined using a pre-determined age range.

What does labor force mean?

The labor force is the sum of the employed and unemployed population. The labor force includes people who are currently employed and people who are unemployed but are actively seeking employment.

What is the pre-determined working age range?

Although different countries might define their working-ages differently, most countries define working age as 15 years old to 64 years old.

However, theoretically, you might be able to work outside of this age range. For example, you can start working at age 14 in the US.

What countries have the highest and lowest labor force participation rate?

Qatar, Madagascar, Zimbabwe, and Nepal are the countries with the highest labor force participation rate in 2020, whereas Yemen, Jordan, Algeria, and Tajikistan are amongst the lowest.

The factors that affect these countries' labor force participation rate include economic, social, and demographic factors.

How do I find labor force participation rate?

To calculate the labor force participation rate:

  1. Determine the employed and unemployed population of the economy.
  2. Calculate the labor force of the economy.
  3. Determine the working-age population of the country.
  4. Apply the labor force participation rate formula:

labor force participation rate = labor force / working-age population

Wei Bin Loo
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Labor force participation rate
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Labor force participation rate
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