The Power of Inclusive Labour Force Participation for Mitigating Population Aging

We develop a dynamic microsimulation model to project the labour force and economic dependency ratios in the United States from 2022 to 2060, taking population projections and the large inequalities between population groups of different race/ethnicity and gender into account. We contrast policy scenarios and show the potential impact that closing the gaps in education, health, and participation rates between population subgroups can have on increasing the U.S. labour force. Our baseline projections indicate an increase of the labour force of about 27 million people by 2060, which is mainly caused by population growth. The downstream effects of removing disparities in population health and educational attainment on labour force participation can add about 10 percent (+2.6 million people) to our baseline projections. The potential effects of closing gaps between genders and between minority groups and the non-Hispanic White population, however, are much larger if we assume the equalization of participation rates for individuals with similar characteristics. Closing gender gaps within ethno-racial groups, for instance, can add 9.9 to 14.3 million people to the labour force. Overall, reducing disparities in labour force participation rates has the potential to more than compensate the effects of demographic aging on the economic dependency ratio.