The Labor Force Participation Rate: Equation & Concept
A country’s unemployment rate doesn’t tell the whole story about employment. In this lesson, you’ll learn about the labor force participation rate, including what it is, related concepts, and how to calculate it. A short quiz follows.
Definition
The labor force participation rate (LFPR) is the proportion of people eligible to participate in the labor force who are actually participating in it by working or looking for work. It is usually expressed as a percent of the total labor force-eligible population in an economy.
Information Needed for Calculation
Labor force: You need to know the total number of people in the labor force. The labor force consists of only those people who are economically active in the economy, which means they are working or looking for work. If you live in the United States, are over the age of 16, and are working or looking for work, then you are part of the U.S. labor force. People under 16 years of age, people who are institutionalized (such as in prisons, mental hospitals, and group homes), and people in the military are not considered to be part of the labor force. Self-employed people are included in this calculation because they are working for profit.
Total population: You need to know the total population of the people eligible to participate in the labor force. The total eligible population includes people who are economically active and economically inactive who also meet the criteria to be in the labor force. You’re economically inactive if you are not working, not self-employed, and not looking for work. In other words, the total eligible population is simply the people who are not in the labor force but can be, and the people that are actively participating in the labor force.
LFPR Formula
The formula for calculating the labor force participation rate is pretty straightforward:
LFPR = LF / P
where:
P = total eligible population (both the economically inactive and active populations)
LF = labor force
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