The labor force participation rate is the percentage of a working-age population that is employed or seeking employment. This does not reflect the overarching population of a country, and rather the economically active portion of a population is contributing, or looking to contribute, to the labor market.
The formula for the labor force participation rate is labor force divided by working-age population, multiplied by 100. For example, take a country with a population of 100m people, of which 50m are employed and 2m are looking for work. 63m are of the working-age population, defined in the U.S. as over 15 years of age (so minumum 16) and under 64 (who are not in prison or nursing homes).
The labor force participation rate in this economy is thus ((50 + 2)/63)*100 — remember that the labor force includes individuals looking for work, not just those actively employed. This equates to 52/63, or .82539*100 = 82.5%. Thus, the labor force participation rate in this economy is 82.5%, meaning that 82.5% of individuals of a working age are participating in the economy.
Hopefully you find this formula intuitive— it simply takes as a percent those looking for work/employed compared to everyone who could be looking for work/employed.)
That’s all from me! Let me know in the comments what other economics subjects you’d like to learn about.
- Read about the Income Approach to GDP here.
- Read more economics stories here.
- Also, to learn more about the oil market, consider reading about PADD Districts, the Why WTI and Brent are Crude Oils, and Why There are Price Differences Among Crude Oils, and my Oil & Gas Terms Guide.
