Formula to Calculate Labor Force Participation Rate

Below given is the formula used to calculate the labor force participation rate:

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Where,

  • The labor force is the sum of workers that are employed and unemployed.

Calculation of Labor Force Participation Rate (Step-by-Step)

Examples

Example #1

According to records, the working-age population of country XYZ was 233,450 thousand, the workers employed were 144,090 thousand, and unemployed workers were 11,766 thousand. Therefore, you must calculate the country XYZ’s labor force participation.

  • First, we need to identify the labor force, the summation of employed workers, whether on a salaried or self-basis. Most definitions define employed persons above the age of 16 and generally exclude those working in homemaking or self-service and volunteers. Unemployed people shall also exclude those who are less than 16 years of age and those who did not look for a job in the last four weeks. The working-age population shall include everyone except for minor persons below the age of 16, people in elderly care centers, and military personnel. When you sum up the employed and unemployed people that shall form the labor force and divide that result by working-age participation, the result will be the labor force participation rate.

Solution

Use the below-given data for the calculation of the labor force participation rate.

  • Workers that are employed: 144090.00Unemployed workers: 11766.00Working-age population: 233450.00

Calculation of Labor Force

  • = 144,090 + 11,766= 155,856

Therefore, the calculation of the labor force participation rate is as follows,

  • = 155,856 / 233,450

Labor Force Participation Rate will be – 

  • = 66.76%

Example #2

Country PQR is an emerging nation and is a small country. It has recently adopted the US Bureau of Labor Statistics framework to calculate its labor force participation rate. The following details have been derived from a public domain maintained by the ministry of labor of the country.

  • Total population of a country: 25344177.00People below minority age (16 yrs): 412766.00People in elderly care centers: 1323789.00Housewives solely looking for home activities: 7433901.00Self-employed people: 5333881.00Volunteers: 412766.00

As per the criteria, the working-age population shall exclude those they cannot employ, like people below 16 years of age, elders, and military citizens. The other labor force will avoid those they cannot engage.

Based on the above information, you must calculate the labor participation rate.

In this example, we are not directly given the labor workforce or working population.

Hence, we shall calculate the working-age population first by excluding minority-age people, militants, and elderly care centers.

Calculation of Working Age Population

  • =25344177.00 – 412766.00 – 1323789.0=23607622.00

Now, we shall calculate the labor force where we must avoid housewives and volunteers they cannot employ.

  • =23607622-7433901-5333881-412766=10427074

Therefore, the calculation of the labor force participation rate is as follows:

=  10,427,074/ 23,607,622

  • =  44.17%

As per the definition in the example, the labor participation rate is 44.17%.

Example #3

McDonald’s wants to open a new franchise, either in-country V or Z. The deciding criteria are to invest in a country with a youth population since it will prefer to employ them. Further, for their business, youth is chosen.

Below are the details for the two countries:

The criteria are to select the country with a higher labor participation rate.

Country V

  • =  2,44,693.00 /10,89,115.00

=  22.47%

Country Z

Therefore, calculation of labor force participation rate is as follows,

  • = 2,33,784.00 /11,99,705.00

  • = 19.49%

Labor Force Participation Rate Calculator

You can use this calculator to calculate the labor force participation rate.

Relevance and Uses

As stated earlier, we can define the labor force participation rate formula as the percentage of the working-age population, which is the share of the labor force. It measures what ratio and proportion of a nation’s population are either actively looking for employment or employed. The higher the labor force participation rate ratio, which we can understand, the higher the nation’s population is keen or interested in working.

We should analyze this ratio and unemployment Unemployment Unemployment refers to a situation where individuals capable of working seek active opportunities for work but cannot find any for various reasons.read more data to understand the overall employment status better. There could be situations wherein recession, and the economyEconomyAn economy comprises individuals, commercial entities, and the government involved in the production, distribution, exchange, and consumption of products and services in a society.read more is really bad, there may be discouragement in labors to work which could mislead the results.

This article has been a guide to the Labor Force Participation Rate Formula. We discussed the labor force participation rate calculation with examples and a downloadable Excel template. You can learn more about Economics from the following articles: –

  • EmbargoEmbargoAn embargo is a political decision taken by countries where the government passes an order to restrict the free trade of goods & services between two nations for a specified period and may include restricting all types of goods & services or trading of particular interest like oil.read moreParticipation Rate FormulaMarginal Product of CapitalFormula of Unemployment RateFormula of Marginal Product of LaborFormula Of Marginal Product Of LaborThe marginal product of labour formula calculates the change in the level of the company’s output when there is the addition of a new employee. The marginal product of labour is calculated by dividing the total product value by the difference in the labour.read more