Glossary
Macroeconomics
Labour force participation rate
The labour force participation rate measures the proportion of the working-age population that is either employed or actively looking for employment. The labour force therefore consists of two groups: people who are working and people who are unemployed but actively seeking work. People who are neither working nor looking for work are classified as economically inactive and are not included in the labour force.
Why does participation matter?
Changes in participation can significantly affect how labour-market data is interpreted.
For example, the unemployment rate may fall even if employment has not increased. This can happen if people stop looking for work and are therefore no longer counted as unemployed.
Participation can be influenced by factors including:
- demographics and retirement;
- education;
- health;
- caring responsibilities;
- migration;
- wages and employment opportunities.
Looking at participation alongside employment and unemployment therefore provides a broader picture of the health and available capacity of the labour market.