Labor Force Participation Rate Formula

Labor Force Participation Rate Formula (Table of Contents)

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What is the Labor Force Participation Rate Formula?

The term “labor force participation rate” refers to the proportion of the total working-age population that is available to work as part of the labor market. In other words, it is the measure of the labor force in an economy, which includes both employed labor force and people who are actively looking for work. The formula for the labor force participation rate can be derived by dividing the aggregate of employed and unemployed human capital available in the labor market by the total civilian non-institutional population. Mathematically, it is represented as,

Examples of Labor Force Participation Rate Formula (With Excel Template)

Let’s take an example to understand the calculation of the Labor Force Participation Rate in a better manner.

Labor Force Participation Rate – Example #1

Let us take the example of a country with the following information pertaining to its labor market,Based on the given information, calculate the labor force participation rate for the country.

Solution:

Labor Force is calculated using the formula given below

Labor Force = Total Employed Civilian Labor Force + Total Unemployed Civilian Labor Force

• Labor Force = 67.8 million + 4.5 million
• Labor Force = 72.3 million

Total Civilian Non-Institutional Population is calculated using the formula given below

Total Civilian Non-Institutional Population = Labor Force + Population Not in the Labor Force

• Total Civilian Non-Institutional Population = 72.3 million + 31.3 million
• Total Civilian Non-Institutional Population = 103.6 million

Labor Force Participation Rate is calculated using the formula given below

Labor Force Participation Rate = Labor Force / Total Civilian Non-Institutional Population

• Labor Force Participation Rate = 72.3 million / 103.6 million
• Labor Force Participation Rate = 69.79%

Therefore, the labor force participation rate of the country for the given period is 69.79%.

Labor Force Participation Rate – Example #2

Let us take the example of a country where there are more details about the labor force statistics. The following information has been extracted from the database of the Ministry of labor,Based on the given information, calculate the labor force participation rate for the country.

Solution:

Total Civilian Non-Institutional Population is calculated using the formula given below

Total Civilian Non-Institutional Population = Total Population – People Below the Age of 16 Years – Military Personnel – People at Nursing Homes

• Total Civilian Non-Institutional Population= 23.51 million – 4.13 million – 1.03 million – 1.55 million
• Total Civilian Non-Institutional Population = 16.80 million

Labor Force is calculated using the formula given below

Labor Force = Total Civilian Non-Institutional Population – People Who Didn’t Search for Job in Last 4 Weeks – Volunteers

•  Labor Force = 16.80 million – 3.50 million – 0.67 million
•  Labor Force = 12.63 million

Labor Force Participation Rate is calculated using the formula given below

Labor Force Participation Rate = Labor Force / Total Civilian Non-Institutional Population

• Labor Force Participation Rate = 12.63 million / 16.80 million
• Labor Force Participation Rate = 75.18%

Therefore, the labor force participation rate of the country for the given period is 75.18%.

Labor Force Participation Rate – Example #3

Let us take the example of the labor market of the US to illustrate the computation of the Labor Force Participation Rate. Based on the records available at the Bureau of Labor Statistics, the population of civilian non-institutional people in the US stood at 257.79 million by the end of 2018. Further, the number of employed persons was 155.76 million and the number of unemployed persons was 6.31 million. Calculate the labor force participation rate of the US for the year 2018.

Solution:

Labor Force is calculated using the formula given below

Labor Force = Employed Labor Force + Unemployed Labor Force

•  Labor Force = 155.76 million + 6.31 million
•  Labor Force = 162.07 million

Labor Force Participation Rate is calculated using the formula given below

Labor Force Participation Rate = Labor Force / Total Civilian Non-Institutional Population

• Labor Force Participation Rate = 162.07 million / 257.79 million
• Labor Force Participation Rate = 62.87%

Therefore, the labor force participation rate of the US for the year 2018 stood at 62.87%.

Explanation

The formula for labor force participation rate can be derived by using the following steps:

Step 1: Firstly, determine the total population of civilian non-institutional people. According to the Bureau of Labor Statistics, the civilian noninstitutional population is constituted by anyone, other than the inmates of institutions such as prisons, mental hospitals, and nursing homes or on active duty in the Armed Forces, who is living in the US and is above the age of 16 years.

Step 2: Next, determine the total employed labor force, which includes the civilian noninstitutional population that is engaged in any kind of paid or unpaid job minus people involved in voluntary work.

Step 3: Next, determine the total unemployed labor force, which includes people who are available for work and are actively looked for a job.

Step 4: Next, compute the total labor force by adding a number of the employed labor force (step 2) and unemployed labor force (step 3).

Labor Force = Employed Labor Force + Unemployed Labor Force

Step 5: Finally, the formula for the labor force participation rate can be derived by dividing the total labor force (step 4) by the total civilian noninstitutional population (st as shown below.

Labor Force Participation Rate = Labor Force / Total Civilian Non-Institutional Population

Relevance and Use of Labor Force Participation Rate Formula

It is important to understand the concept of the labor force participation rate as can be a strong indicator of the health of an economy. In fact, a declining trend in the participation of the labor might be indicative of an economy in recession during which people often get discouraged and stop looking for employment.

Labor Force Participation Rate Formula Calculator

You can use the following Labor Force Participation Rate Formula Calculator

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