over the recession, labor force participation rates dropped most for people without a high school degree

Many economists view labor force participation rates (LFPR) as a more important economic indicator than the unemployment rate. Formally, the LFPR is defined as the share of civilians 16+ years of age in the labor force (employed or unemployed but looking for work) divided by the total number of civilians in that age cohort. When the economy is doing well the LFPR tends to be higher than when it is doing poorly. This is because more people either have jobs or don’t feel discouraged, and continue to look for work (these are the only people officially considered unemployed).

Although the recent reductions in the state and national unemployment rates are encouraging, the fact is that LFPR remains well below its pre-recessionary level (dropping from 66.5 percent in 2006 to about 63.5 percent today). This means a fair share of potential workers are sitting out, waiting for the economy to get better before resuming their job search.

In the following chart I use data from the Current Population Survey (March supplement) to plot LFPR for civilian adults, by educational attainment. Several things stand out. First, the LFPR for people without a high school diploma is substantially lower than for the rest of the population. In 2011 only 36 percent of 25+ civilians without a high school degree were working or looking for a job. Often times this is due to disability or illness, but other times its just an inability to find work.

Second, we see a strong correlation between education and LFPR, with participation rates highest for those with at least a bachelor’s degree. This is consistent with previous posts of mine showing higher incomes and lower unemployment rates for the college educated.

Looking over time we see what I think is a particularly important consequence of the recession–the LFPR declined the most for those with the least amount of education. In the following chart I show the percentage change in LFPR by educational attainment from 2006-2011. Here we see LFPR dropped more than 10 percent of those without a high school degree. By comparison it dropped only about 5 percent for those with some college and less than 2 percent for those with a bachelor’s degree.

What does this mean? With unemployment rates still high, the Great Recession continues to have important effects on people and families across the country. Particularly hard hit are those already most marginalized in the labor force–people without a high school degree. A robust economy can alleviate some of these problems, but a secure safety net remains a crucial component of our society.

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