Labour force participation

The labour force ‘participation rate’ shown in Table 4.1 is the proportion of the total population that chooses to take part in the labour force. The labour force, however, includes not only those people with jobs (the workforce) but also those actively seeking work (the unemployed). The participation rate tends to move in line with the business cycle. It falls during recessions as jobseekers become discouraged and abandon the active search for jobs, thus ceasing to meet the tight definition of ‘unemployed’. Then, as the cycle turns up, formerly discouraged jobseekers resume the search for work, thus returning to participation in the labour force. However, the generally decade-long average rates shown in Table 4.1 should iron out most of the cyclical effect, exposing the longer term trend.

The participation rate has been increasing steadily since the 1960s almost universally throughout the developed world. The latest rates are at or near the historical peak for most of the selected countries. Those countries show contrasting trends. Several that started the period with high participation have not had it rise much – Japan, Sweden, Finland and the United Kingdom – whereas several that started low have seen it rise considerably – the Netherlands, New Zealand, Belgium, Norway, Canada and Ireland. In other words, the period has seen a process of convergence on a higher average. Australia's participation rate has gone from somewhat below average to a little above.