In the CIE AS courses labour participation is examined in Unit 5. Here is a graph from the book entitled: The New Zealand Economy – Lattimore & Eaqub 2011. How is it worked out? Below is a flow chart explaining it.
The participation rate of people of working age in the labour force is also quite variable over time – see graph below.
Recession – participation rates tend to fall as people who have lost their job will sometimes move into full-time training to develop new skills or leave the labour force as they become despondent about finding a paid job. In New Zealand rates fell after the recessions of 1985, 1997, and 2008.
Boom – participation rates tend to rise as people see that there is greater opportunity for acquiring gainful employment. In New Zealand rates increased with upswings in the business cycle – 1993 and 2001.
Government policy can also influence labour force participation. If wages increase for younger people or older people, or if tertiary education fees rise, the participation rate will typically rise. If welfare benefits for single parents rise, the participation rate can be expected to fall.