Why Have Employment Rates in the United States Lagged Other Countries?

From 2007 to 2017 the fraction of Americans employed fell by 2.9 percentage points. As we discussed in a previous blog post coauthored with Harris Eppsteiner, the aging population has been driving the decline in the US employment-population ratio, or employment rate. (The employment-population ratio, or the employment rate, is the fraction of the overall population working, and as such it reflects a combination of the labor force participation rate and the unemployment rate.)

In contrast, employment rates actually rose in 13 of 29 advanced economies from 2007 to 2017, even though they also faced a similar headwind of an aging population. Moreover, after adjusting for changes in the age-sex structure within each country, employment rates rose in 21 of 29 advanced economies during this period.[1]

The biggest difference between employment rates in the United States and other advanced economies has been changes in female employment rates, which, adjusting for changing age structures, were stable in the United States but increasing elsewhere. This factor is responsible for 77 percent of the aging-adjusted difference in employment performance between the United States and other advanced economies over this period. The second largest source of difference is converging employment rates for older workers (defined as 55 and older), as other countries increased their employment rates towards the US level. This factor is responsible for 52 percent of the difference with other advanced economies. (These two explanations overlap because both include women age 55 and older.) Employment for prime-age men and younger workers fell almost everywhere but at similar rates in the United States and other advanced economies.

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