The labor force participation rate measures the portion of the working-age population that engages actively in the labor market, either by working (employed workers) or looking for work (unemployed workers).
It is an indicator of the size of the available labor supply as well as, by breaking it down by gender and age groups, the profile of the economically active population. The rate is given by the following formula:
labor force participation rate =
labor force ÷
working-age population ×
Labor Force = Total of employed and unemployed persons.
(labor force equates to active population.)
The rate increases when either the numerator increases or the denominator decreases, and vice-versa.
Typical causes of increase:
Surge of employment opportunities.
Rising demand for income.
Strong drive to personal economic emancipation.
Typical causes of decrease:
Lesser employment opportunities.
Changing labor pattern from a high to a low labor-intensive economy.
Stronger and longer schooling enrolments, especially of young workers (15 to 24 years of age).
Higher earnings of one family member allowing the others to remain at home.
Extension of the working-age ceiling from, for instance, 65 years to 70 years.
Source: ILO (International Labour Organisation): Key Indicators of the Labour Market, 9th edition.