Participation rate
About the calculation
The participation rate in an economy refers to the proporation of the working age population which is participating in the labour market. In other words, of the working age population (those older than 15 years of age), how many of them are either employed (working at least one hour per week) or unemployed (not working but actively seeking work.
If the participation rate is declining in an economy that means that more of the potential workforce is not participating in the workforce, which can be a concern for total production levels, GDP and GDP per capita in the economy.
Since the labour force is defined as those employed plus unemployed, the participation rate is the labour force divided by the population older than 15 years of age.
Participation rate = labour force / population older than 15 years x 100
How is it examined?
Students can be directly asked to calculate the participation rate in an economy, or identify whether the participation rate increases or decreases as a result of changes in the economy or labour market.
What students get wrong
Common errors include:
- thinking the total population in the economy is relevant
- thinking unemployed are excluded from the labour force
- thinking only full time workers are considered employed