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Over the postwar years, the civilian labor force participation rate (the percentage of people aged 16 and older who are either employed or are looking for work) has gradually increased from about 59 percent to about 67 percent. Currently, it stands at 66.1 percent. However, this smooth trend in the aggregate labor force participation rate hides substantial differences among the age groups.
Labor force participation rates of those in their prime earning years (25-54) have steadily increased primarily because of the increased labor force participation of women. Since 1948, this has increased from about 32 percent to about 60 percent. In contrast, the labor force participation rate of the young (16-24) has been falling since late 1980s, while the labor force participation rate of the older segment of the population (55 years and over) has been rising. Economists believe that the decision to enter the labor force, like any other decision, is based on evaluating costs and benefits. The cost of entering the labor force is time lost for leisure or other activities individuals can do instead of working such as spending time with children or attending college. The obvious benefit of entering the labor force is the income earned. But there may be other benefits, such as job satisfaction. As benefits of entering the labor force increase or costs decrease, we should see increased labor force participation. The increased labor force participation of women is the obvious example. As economic opportunities for women increased, the benefits of entering the labor force increased, which resulted in more women choosing to enter the labor force.
Thus, changes in labor force participation might tell us something about the economic well-being of the population and its various segments. The decrease in labor force participation among of those 16-24 in recent decades may stem from increased college attendance. As more high-school graduates decide to go to college, they postpone their entrance into the labor force. The ability of this growing number of young people to devote more time to education before entering labor force is probably an indication of increased prosperity of the society. 
The increase in the labor force participation rate of those over 55 is more puzzling. As the chart shows, the labor force participation rate of people aged 55-64 has been rising since about mid-1980s. The labor force participation of those over 65 years of age has been rising since early 1990s. Many of us would assume that as society becomes more prosperous, more people would be able to retire early. Indeed, from 1948 to late 1980s, the labor force participation rate of people 65 and older fell steadily.The trend reversed in the early 1990s. Since then the labor force participation rate of those over 65 has increased from about 11 percent to more than 16 percent. Simultaneously the labor force participation rate of those 55-64 years old has increased from about 55 percent to more than 64 percent. The labor force participation of this age group might have increased for a number of reasons. First, the increased life expectancy and improved health of this age group may have made staying in the labor force past 65 both easier and more attractive Second, increased economic opportunities for these older workers (in terms of higher salaries of more available jobs, which might have happened during the boom years of late 1990s), would have increased labor force participation rate. Finally, inadequate retirement savings or Social Security payments might simply force people to stay in the labor force past the retirement age. While the labor force participation data alone is unable to separate the influences of these forces, this last possibility is disturbing. Polina Vlasenko is a Visiting Research Fellow at AIER
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