Blog Posts > Stronger Family Policies Can Improve Labor Force Participation
December 18, 2018

Stronger Family Policies Can Improve Labor Force Participation

West Virginia has historically had one of the lowest labor force participation rates in the country. The labor force participation rate (LFPR) is the share of people 16 years or older either working or seeking work.  A healthy LFPR is a key driver of a society’s economic output per capita and overall standard of living in the long run.

Nationally, the prime-age LFPR (ages 25 to 54) peaked in the late 1990s at 84 percent, before spending the next 20 years declining. But as a paper from the San Francisco Federal Reserve explores, the decline in the U.S. LFPR is in stark contrast with other industrialized nations, where participation rates for prime-age workers continued to increase.

The paper compares LFPR in Canada and in the U.S. For many years, rates for both countries tracked closely together, rising steadily into the 1990s, before slowing in the late 1990s, with both countries reaching identical rates of 84 percent before the turn of the century. Since then however, the U.S. and Canada have moved in opposite directions, with prime-age workers in the U.S. leaving the labor force, while the LFPR in Canada has gradually increased. By 2017, there was a 5.3 percentage point gap between the U.S. and Canada’s LFPR.

The gap is more pronounced for women than it is for men. For men, LFPR declined in both countries during the Great Recession, with a sharper decline and slower recovery in the U.S., resulting in a net 2.5 percentage point gap U.S.-Canadian prime-age male labor force participation in 2017.

For women, the gap is the result of steady increases in labor force participation among Canadian women and steady declines in participation among U.S. women. In 1997, participation among women in the United States and Canada was nearly identical, close to 77 percent. By 2017, participation for Canadian women had risen to 83 percent while that for U.S. women had fallen to 75 percent, leaving an 8 percentage point gap.

A key factor explaining the larger gap for women, according to the report, is the extensive parental leave policies in Canada. Eligible Canadians can take a maximum of 35 weeks of paid parental leave at 55 percent of their salary, or a longer leave at a reduced rate, while biological mothers can also claim up to 15 weeks of paid maternity leave, providing strong incentives to remain attached to the labor force following the arrival of a new child.

In comparison, U.S. parental leave depends on the jurisdiction, but at the federal level, eligible workers can take up to 12 weeks of job-protected leave. However, it’s unpaid leave, making the United States the only OECD country that does not mandate paid leave for mothers.

The parental leave policies in Canada arrived in several waves beginning in the late 1970s, the timing of which has allowed researched to track the positive effects of parental leave on mothers’ labor force participation rates.

According to the paper, family supporting policies like parental leave could encourage more workers to join the labor force, and reverse the national decline in LFPR. And as the state with the lowest LFPR in the country, West Virginia would stand to benefit the most from enacting its own parental leave and other family supporting policies.

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