A DECOMPOSITION OF THE UNITED STATES EMPLOYMENT-TO-POPULATION RATIO: AN ANALYSIS OF LONG-RUN AND SHORT-RUN DRIVERS

Abstract

This paper examines the short- and long-run drivers of the employment-topopulation ratio from 1950 to 2013. Specifically, the employment-to-population ratio is decomposed into the employment rate, participation rate, and population ratio. I observe how changes in each factor impact the ratio. Results are also broken down by race, ethnicity, and gender. Additionally, the demographic component of the employment-to-population ratio is projected for twenty years. I find that changes in the participation rate and age demographics are the medium- to long-run drivers of the employment-to-population ratio and that the black ratios tend to be more affected by changes in demographics for young- to middle-aged cohorts, while white ratios tend to be more affected by changes in demographics for middle- to old-aged cohorts. Projections of the employment-to-population ratio show that the ratio will decline 2-3% over the next twenty years, necessitating public policy changes.